Magnum 1 January 2013 Magnum Connect Issue No. 53 January 2013 Monthly Magazine Magnum Wealth Management Pvt. Ltd. Regd. Office : Mr. Piyush K. Upadhyay (Correspondent) Magnum Connect D-13, Empire Mahal, 806, Dr. B. A. Road, Khodadad Circle, Dadar T.T., Mumbai – 400 014. For General Enquiries Contact : +91-22-2415 8686 E-mail : [email protected]Website : www.magnum.co.in Printed at : HariOM Printers, Mumbai. Dear Friends, Another year has passed and despite lots of volatility the Indian markets have became more mature with lots of significant changes happening in the year 2012. The passing year was not only one of the tremendous years for the markets with Sensex adding about 4000 points or over 25 percent and Nifty surging by about 1300 points or over 27%, but it also witnessed foreign investors reposing their faith once again in the Indian markets with a cumulative investment in the country’s equity market, reaching to an all- time high of $125 billion. Mainly on the back of India’s growth potential and the recent reforms initiatives undertaken by the government to boost economic growth and investor sentiment. Stock markets were in full fervor and even overshadowed gold’s glitter, which has been outperforming the stock market for more than a decade, with strong rally in 2012 equities showed a clear sign of reversal of trends. Year 2013 is likely to see the momentum going with government taking strong stand on its reform measures, which will continue enticing foreign investors to the Indian markets. However, persistent macroeconomic headwinds will keep weighing the sentiments with global economy too not looking in good shape, still the reform measures initiated across the globe are likely to fructify in the coming years and will provide some relief. Wishing you a very happy and prosperous new year of investing! Jiten J. Chheda (Director) Magnum Group This document has been prepared by M/s Magnum Wealth Management Pvt Ltd and is being distributed in India by M/s. Magnum Wealth Management Pvt Ltd a registered broker dealer. The information in the document has been compiled by the research department. Due care has been taken in preparing the above document. However, this document is not, and should not be construed, as an offer to sell or solicitation to buy any securities. Any act of buying, selling or otherwise dealing in any securities referred to in this document shall be at investor’s sole risk and responsibility. This document may not be reproduced, distributed or published, in whole or in part, without prior permission from the Company M/s. Magnum Wealth Management Pvt Ltd Subject only to Mumbai jurisdiction Index Cover Story Telecom Sector ...................................................2 Economy Article..................................................6 Equity Company Research..........................................10 Stock Update....................................................12 Corporate News................................................13 Market Snapshot...............................................15 Economy Economy News.................................................17 Statistics Sales................................................................19 Scorecard : Telecom Sector ............................. 20 Dividend Yield..................................................22 High PE ........................................................... 23 Low PE ............................................................ 24 Price Trend...................................................... 25 Mutual Fund Mutual Fund Analysis....................................... 26 MF Scorecard................................................... 27 Study Flash Crash & Sebi’s Latest Initiatives..............29 Provisions & Amendments to GAAR..................31 Commodity Commodity Watch ........................................... 33 Insurance Life Insurance ..................................................36
Transcript
December
Magnum
1January 2013
Magnum ConnectIssue No. 53 January 2013
Monthly Magazine
Magnum Wealth Management Pvt. Ltd.Regd. Office :Mr. Piyush K. Upadhyay (Correspondent)Magnum ConnectD-13, Empire Mahal, 806, Dr. B. A. Road,Khodadad Circle, Dadar T.T.,Mumbai – 400 014.For General Enquiries Contact :+91-22-2415 8686E-mail : [email protected] : www.magnum.co.inPrinted at : HariOM Printers, Mumbai.
Dear Friends,
Another year has passed and despite lots of volatility the Indian markets have became more mature with lots of significant changes happening in the year 2012. The passing year was not only one of the tremendous years for the markets with Sensex adding about 4000 points or over 25 percent and Nifty surging by about 1300 points or over 27%, but it also witnessed foreign investors reposing their faith once again in the Indian markets with a cumulative investment in the country’s equity market, reaching to an all-time high of $125 billion. Mainly on the back of India’s growth potential and the recent reforms initiatives undertaken by the government to boost economic growth and investor sentiment. Stock markets were in full fervor and even overshadowed gold’s glitter, which has been outperforming the stock market for more than a decade, with strong rally in 2012 equities showed a clear sign of reversal of trends.
Year 2013 is likely to see the momentum going with government taking strong stand on its reform measures, which will continue enticing foreign investors to the Indian markets. However, persistent macroeconomic headwinds will keep weighing the sentiments with global economy too not looking in good shape, still the reform measures initiated across the globe are likely to fructify in the coming years and will provide some relief.
Wishing you a very happy and prosperous new year of investing!
Jiten J. Chheda
(Director)
Magnum Group
This document has been prepared by M/s Magnum Wealth Management Pvt Ltd and is being distributed in India byM/s. Magnum Wealth Management Pvt Ltd a registered broker dealer. The information in the document has been compiled by the research department.
Due care has been taken in preparing the above document. However, this document is not, and should not be construed, as an offer to sell or solicitation to buy anysecurities. Any act of buying, selling or otherwise dealing in any securities referred to in this document shall be at investor’s sole risk and responsibility.
This document may not be reproduced, distributed or published, in whole or in part, without prior permission from the CompanyM/s. Magnum Wealth Management Pvt Ltd
Subject only to Mumbai jurisdiction
IndexCover Story Telecom Sector...................................................2 Economy Article..................................................6
Uncertain policies may undo India’s telecom sector success:Telecom industry in India has undergone a revolutionary phase over the past few years with tremendous growth in the telecom subscriber base. Over the last few years, the Indian telecom market has shown explosive growth due to the policy initiatives undertaken by the government. The country’s telecom industry is one of the largest telecommunication networks in the world and one of the fastest growing. Moreover, with the introduction of advance services like 3G and WiMAX, along with the approval of National Telecom Policy (NTP), 2012, the industry has reached next level of revolution. With the ongoing investments into infrastructure deployment, the country is projected to witness high penetration of Internet, broadband, and mobile subscribers in near future.
Untapped rural market, rising affordability, value-added services provided by telecom companies, low handset prices, cheap call rates, rapid expansion of infrastructure, robust competition, rising disposable income of the country’s middle-class people, and the government support are mainly fueling the growth in mobile subscriber base. The country has one of the world’s lowest mobile phone tariff structures, compounding the growth of the mobile market.
However, on the flip side current regulatory uncertainty hanging over India’s telecom sector has made the country’s telecom stocks unattractive for investors. Further, the sector continues facing innate problems, like spectrum allocation, merger and acquisitions (M&A’s), consolidation, etc. Additionally, Increasing price competition and aggressive customer acquisitions by the telecom operators has led to saturation in the telecom industry.
Performance of the Industry:The Indian telecom sector -- which is now grappling with a host of problems -- has seen tremendous growth over the last few years. Though, the subscriber numbers grew sharply for the October quarter of the FY12, the actual growth slope has receded. This is because the growth rate is being computed on higher base. The Y-o-Y growth rate which was at 40.03% in October 2010 slipped to 14.93% in October 2011 and dropped further to 1.94% in October 2012 reflected that the industry is reaching a consolidation stage.
Growth DriversKey factors, which will fuel the growth of the sector include increased access to services owing to launch of newer telecom technologies like 4G services, better devices, changing consumer behaviour and the emergence of cloud technologies.
Subscriber BaseThe mobile subscriber base in India has risen by 1.94 per cent to 935.18 million connections in October this year, in comparison to 914.59 million connections in October, 2012. The mobile service penetration in the country is currently at 51 per cent and is expected to grow to 72 per cent by 2016.
Mobile Value Added Services (MVAS)India’s current MVAS industry has an estimated size of $ 2.7 billion. The industry derives its revenues majorly from the top five to six products such as game based applications, music downloads, etc, which continue to form close to 80 per cent of VAS revenues. The Indian MVAS industry is estimated to grow to US$ 10.8 billion by 2015, with the next wave of growth in subscriptions expected to come from semi-urban and rural areas.
Mobile Number Portability (MNP)Mobile Number Portability requests increased from 69.78
Telecom Sector
Number of Subscribers
880890900910920930940950960970
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Performance of Telecom Industry
40.03
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1.950
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20
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%)
700
750
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850
900
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No. of Subscribers Y-o-Y
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Telecom Sector
million subscribers at the end of September 2012 to 75.14 million at the end of October 2012. In the month of October 2012 alone, 5.36 million requests have been made for MNP.
Handsets
The mobile handset market’s revenues in India are expected to grow from $ 5.7 billion in 2010 to $ 7.8 billion in 2016. India is the second largest mobile handset market in the world and is set to become an even larger market with unit shipment of 208.4 million in 2016 at a CAGR of 11.8 per cent from 2010 to 2016.
ChallengesEven though the Indian telecommunications sector has come a long way since the time of liberalization and promises growth, there are a number of issues which have soured the success story of Indian Telecom sector.
Excessive Competition:
One of the major concerns that have come to the forefront in the recent past has been heightened competitive intensity in the industry that has correspondingly fuelled the price war between industry players. The Indian wireless market is one of the world’s most competitive markets, with 13 operators across 23 wireless ‘circles’ and 6 to 8 competing operators in each circle.
GSM Average Revenue Per User (“ARPU”): The average ARPU in India stands at around $2 (March 2012) as against the estimated $63 for NTT Docomo, Japan; $33 for Vodafone, UK; and $12 for China Mobile, China. A similar pattern is seen in the case of RPM.
The Indian telecommunications sector is a highly competitive sector. A sustained price war in the industry has resulted in declining ARPUs. As a result, operators
are focusing more on data and value added services to meet the revenue deficit caused by fall in revenue by their core business.
A declining trend in ARPU has been witnessed by GSM Operators, from the year 2006; however, the trend seems to be a little exceptional for the Year 2012. However, it remains to be seen whether GSM operators could continue with gaining trend, or the figures of FY12 would just come as a short-term breather to the Telecom Industry.
Meanwhile, CDMA operators fared better than GSM operators with a 14.54 per cent increase in ARPU over the last one year. While in December CDMA ARPU was only Rs 73 it went up to Rs 75 in March 2012, which is an increase of 2.49 per cent. However, this is because the percentage of inactive customers was much higher with CDMA operators, so much so that in March 2012 there was a decline of 2.77 million in the CDMA subscriber base due to removal of inactive subscribers from the books.
Existing Regulatory Framework:
Recent events like 2G controversy and the cancellation of 122 licences by SC have led to significant regulatory uncertainty in the industry. The Department of Telecom (DoT) and Telecom Regulatory Authority of India (TRAI) have made several policy changes and recommendations in such critical areas as delinking of licence from spectrum, allocation of spectrum via auctions, and spectrum liberalization.
Government’s recent decision to change spectrum-allocation policy from a fixed-cost regime to an auction of all existing and future spectrum assets has impacted the industry majorily, as this has significantly raised the cost of licenses’ and spectrum, weakening the credit metrics of most telecom firms, mostly funded by debt.
A major regulatory concern has been the finalisation of the 2G auction reserve price and the modalities for the auction.
GSM ARPU at Rs 97 (FY12)*
261
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220
316
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These auction are expected to have long-term implications for the sector in terms of deployment of technology (as the auctioned spectrum would be liberalised), cost of acquiring spectrum, competitive intensity, spectrum holding, and pricing flexibility of the operators.
Lack of Telecom Infrastructure:
Operators have to incur huge capital costs to provide telecommunications services in the rural areas of India. Adding to this cost is the logistical challenge posed by the lack of supporting infrastructure such as lack of roads and electricity. However, with new players coming in, the intensity of competition in the industry has increased, especially over the last four years.
FDI in Telecom sector plunges to $43 million in April-September FY’13:
India is having a very liberal FDI policy in the telecom sector and barring few segments FDI Cap is permitted in the sector, while ISP without gateway, Infrastructure provider providing dark fibre, right of way, duct space, tower and manufacture of telecom equipments has permissible limit of 100% FDI. As on whole, FDI up to 100% is allowed, under the automatic route, in most sectors/ activities. FDI under the automatic route does not require prior approval either by the Government of India or the Reserve Bank of India (RBI).
FDI as a source of funding declined for the once lucrative telecom sector with foreign investment inflows plunging to $ 43 million in the April-September period of the current fiscal.FDI in the telecom sector, which includes radio paging, cellular mobile, basic telephone services, attracted $ 1.9 billion in April-September 2011, according to the latest data of the Department of Industrial Policy and Promotion (DIPP). Industry’s shrinking margins and profitability is the main reason why foreign investors are shying away.
The decline comes at a time when the economic growth has slipped further in the July-September quarter to 5.3 per cent, raising fears that the slowdown may pull down the annual growth rate to a decade low.
Stretched financial profile of the telcos:
The financial profile of most of the telcos has deteriorated considerably since March 2010, mainly because of the significant debt-funding of their capital expenditure; acquisition of 3G and broadband wireless access
spectrum; and overseas acquisition.
The financial risks arising out of such deterioration are aggravated by the fact that a significant portion of the debt is foreign currency (largely USD)-denominated (for example 81% for Bharti Airtel, 76% for Reliance Communication as on March 31, 2012), while the revenues are largely denominated in rupees.
Going forward, the telcos are likely to require sizeable funding to meet the commitments related to regulatory developments. The telcos would have to make decisions on the amount of spectrum (circle-wise) that they would want to renew/re-farm, and their existing capital structure would have an important bearing on these decisions.
The Government of India has allowed mortgaging of spectrum, to make funding available for the industry. However, Reserve Bank of India (RBI) is yet to issue guidelines on use of licence/spectrum as collateral against loans.
Recent Developments:One time spectrum fee- A nightmare turned realty
In an attempt to create level playing field between old and new operators, Union cabinet, sticking to Empowered Group of Ministers (EGOM’s) recommendations, approved a proposal to levy a one-time fee on telecommunication companies holding excess airwaves beyond a specified limit, to garner almost Rs 31,000 crore.
The EGOM decided to collect a one-time spectrum fee from all GSM-based telecom operators and CDMA carriers holding more than 4.4 Mhz, 2.5 MHz airwaves respectively, for the remaining period of their licenses, respectively. However, a new twist was added when it was decided to collect an additional levy from operators that were given more than 6.2 Mhz spectrum from July 2008 onwards, as suggested by Attorney General (AG). The Empowered Group of Ministers, headed by Finance Minister P. Chidambaram, only decided on 4.4 MHz, and not 6.2 MHz, as the threshold for the levy of a one-time fee, a move that could fetch Rs 23,000 crore for the exchequer.
Nevertheless, cabinet’s tweaking EGOM’s recommendation and partially incorporating Attorney General’s portion of legal opinion, stuck to a prospective charge for GSM-based telecom operators, which held beyond 4.4 Mhz
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spectrum, while for operators holding beyond 6.2 Mhz, retrospective charge --from July 2008--as suggested by the AG, was decided upon.
2G Spectrum Auction: Damp Squib
In the November auction, the government could raise only Rs 9408 crore of the targeted Rs 31,000 crore, with telecom companies bidding for airwaves in only some of the 22 telecom service areas the country is divided into. The November auction was for airwaves in the 1800 MHz frequency band.
The failure of spectrum auction could be highly attributed to the high reserve price fixed by government. Government had fixed around 8 times high reserve price for GSM spectrum and 11 times high price for CDMA spectrum compared to the amount on which companies were allocated pan-India permits till 2008. These auctions are a key part of the federal government’s efforts to raise revenue to keep its budget deficit within its target of 5.3% of GDP this fiscal year through March 2013.
Cabinet approves another Round of Telecom Spectrum Auction
After a muted response to an auction held in November, where four key zones were left unsold, India’s federal cabinet on December 13, 2012, approved a renewed push to sell telecommunications bandwidth.The auction’s starting prices were slashed by 30% for the Delhi, Mumbai, Karnataka and Rajasthan service areas in the 1,800 MHz category. The four areas didn’t receive any bids in the November auctions, with companies saying the prices were far too high. The ministers also approved a proposal to auction airwaves in the 900 MHz band.
The 900 MHz bandwidth is used by some telecom companies who will have to renew their permits starting November 2014. The Telecom Regulatory Authority of India had suggested that auctions in this frequency be held by May 2013. In the second round, India plans to sell unsold spectrum in the 1800 MHz as well as in the 900 MHz frequency. The base price for one slot of 1.25 MHz bandwidth in 900 MHz frequency has been fixed at twice the starting price for 1800 MHz.
Conclusion:The Indian Telecom industry, which has continued to emerge as the prime engine of economic growth, contributing to nearly 2% of the Indian GDP, is currently at
an inflection point, with the 2G game being largely played out by the government.
Plagued by increasing competition, the telecom industry is adding more and more inactive subscriber, leading to saturation in the industry. The number of active subscribers has come down over the years. A lot of subscribers have multiple mobile connections. Therefore, theoretically, there may be many subscribers of particular telecom company, but the usage is very low or nil. Now, many companies are trying to weed-out such subscribers.
However, these customers are also an unhappy lot: the experience of service quality has gone from bad to worse, and simple things like stopping unwanted messages seem to be a big deal. Fresh investments are tough to finance, mainly because half of the leading operators are in loss, and some of the profitable ones are already awash in debt.
Finally, the depressed market values of these companies discourage the issue of fresh paper. In short, the poster boy of India’s LPG (liberalization, privatization, globalization) story is not worth showcasing any more. It doesn’t help as the government seems to be obtaining yields from the industry even when it has entered a distressed state. The licence fees and spectrum charges that the phone companies pay the government total up to more than today’s straitened profits, and in the case of some companies add up to twice as much as profits and more.
Revenue under these heads is over and above the massive sums that the government will make on spectrum auction – the auctions scheduled for this year earlier were expected to fetch much more than the government’s estimate of Rs 40,000 crore (Rs 400 billion). The government obviously will not give up its take, especially since the alternative to spectrum auctions has been discredited, with the target of meeting fiscal deficit target of 5.3 per cent, looking to be a challenging task.
So the way to save a once-dynamic industry, whose revenue totals up to more than two per cent of GDP, is to take a leaf out of the airline industry -- let excess capacity go out of the market, and allow the industry players that remain to increase their tariffs from today’s low-low levels, which currently are the cheapest in the world at 41 to 43 paise and build viable businesses, thereby implying the theory of ‘Survival of the Fittest’.
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Global growth remains fairly soft; developed nations still trapped in slow laneThough the year 2012 came to a close, the extended story of global economic troubles that began in 2007 still persists. However, the current economic situation is less worrisome than the one experienced in 2008. The developed economies are still trapped in the slow lane of activity with economic performances ranging from recession in Europe, to negligible growth in Japan and only reasonable advances in the US. In other words, both developed and emerging economies underperformed for the year, thereby making a fairly soft and uneven entry into the New Year. On the positive side, some key risks to the global economy eased with the receding threat of an imminent Greek exit from the Euro-zone and proof that China’s economy was gaining momentum in response to renewed stimulus and improved domestic spending. Going forward, the global economic outlook is covered to a large extent by uncertainty about developments in advanced nations, mainly the fiscal policy in the US, which poses a major risk to the future economic situation. Further, economic growth in the euro zone as a whole may be negatively affected by worsening of the situation in the countries on the southern periphery, mainly Greece.
To be more precise, the US economy still remains held-up in a persistent pattern of sluggish growth, which has made it mainly helpless to the fiscal challenge that the country faces in the after effects of the Presidential Election along with global economic volatility. Further, the prevailing lackluster growth is fore stalling the still high unemployment rate from falling as quick as possible in order to create a sense of real recovery. On the other hand, manufacturing is the only sector in the US to show kind of normal revival for the year. Going forward, absence of timely legislative action on the so-called ‘fiscal cliff’ could push the still struggling US economy back into recession. On the other
side, if fixed, there would be greater clarity on the near-term economic prospects in the US.
Situations like policy stalemates and market turmoil have given rise to a renewed recession fear in Euro-zone economy, though the downturn is not as deep as was seen in 2009, a striking rise in unemployment rate, also suggests that the current slump isn’t soft either. Similarly, manufacturing sector in euro-zone is still contracting, though at a modest space. In the midst of the many structural problems infecting the 17-nation monetary union is the wide difference in performance among the key players. On the whole, more than anything else, the Euro-zone needs a plan for stronger economic growth over the long-term with all eyes on the January ECB council meeting.
The Japanese Economy, which is never short of challenges, is probably in the recessionary phase. Though, the rebuilding activity helped Japan recover from the devastating earthquake more quickly than expected, the sharp downturn in global demand, upon which Japan depends to a great extent for its economic welfare, signals the start of a renewed recession. Here we have to take a note that Japan’s annualized GDP growth for the third quarter of the year contracted sharply by 3.5% against the contraction of 0.9%. Further, amid slowing global demand, the stubborn rise in the yen is also an important barrier for getting the economy on a steady track. Moreover, struggling export growth is creating challenging conditions for the manufacturing sector. However, on the positive side, a change in government is likely to mean a more aggressive policy stance on both the fiscal and monetary sides.
On the whole, the US economic sluggishness, a renewed recession in the Euro-zone, and a noteworthy slowing in the growth rate of major developing economies, have created a risk-averse climate across the globe. Going forward, developed economies enduring a multi-year period of fiscal and economic restructuring may need more time to record a strong growth.
Springing positive surprise, IIP registers growth of 8.2% in OctoberRebounding from a negative growth in the previous month, index of industrial production (IIP) growth accelerated to 8.2% in October as against the contraction of 0.7% (revised) witnessed in September, mainly on the back of low base effect of last year. Further, the healthy expansion in the industrial growth can also be attributed to the 9.6% growth seen in manufacturing activities along with consumer
Economy Article
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durables and non-durables. However, on collective basis, growth for the April-October period recorded a trivial growth of about 1.2% compared to 3.6% in the same period of previous fiscal. Further, on a sequential basis too, industrial growth surged by 2.5% for the month as against a de-growth witnessed in the previous month.
To be more precise, manufacturing output witnessed a robust growth of 9.6% for the month, after declining by 1.5% in the previous month and by 6% in the same month previous year, mainly led by the base-effect and pre-festival sales impact. Sub-sectors displaying contraction in the manufacturing sector declined to 5 from 10 in the previous month. On the other hand, the growth pace of five sub-sectors, which made the highest contribution to manufacturing growth increased sharply in October to 19.1%. However, the sustainability of this number looks doubtful, since much of the turnaround in the output was provided by the pre-festival related sales impact, which will ultimately fade out in the months to come.
Entering the negative zone, the mining sector displayed a contraction of 0.1% in October as against a revised positive growth of 2.3% in the previous month. Further, reflecting base-effect, the pace of growth of coal production in the index of core industries, also moderated to 11% in October from a healthy expansion of 21% in the previous month. On collective basis, the growth contracted by 0.7% in April-October period against a de-growth of 2.2% in the same period a year ago. So far this fiscal, the suspension of iron ore mining in Goa and in some regions of Odisha and other coal regulatory environment problems, continue to affect the mining & quarrying sector performance.
Sectoral growth in IIP:
Continuing its revival trend, electricity sector registered a growth of 5.5% for the month as compared to 3.9% in the previous month, marginally lower when compared to 5.6% a year ago. As per the Central Electricity Authority (CEA),
the thermal electricity generation’s growth rate improved slightly to 11.9% against the 11.8% in the previous month, mainly on the back of robust growth witnessed in domestic coal production. On cumulative basis, electricity generation expanded by 4.7% in the 7-month of the current fiscal, substantially lower than 8.8% growth recorded in the same period a year ago. So far this fiscal, this sector has been the fastest growing sector in the whole index.
From the use-based categories, Capital goods, which have been holding up this financial year, witnessed a healthy growth of 7.5% in the reporting month as against a decline of 12.9% in the previous month. Output of capital goods turned positive after contracting for the last 7-months. However, for the April-October period, the output constricted by about 11.4% as compared to a contraction of 0.5% in the corresponding month previous fiscal. For the reporting month, items such as aluminium conductors and cable, rubber insulated showed a substantial expansion. Consumer goods also showed optimism in activity with a growth rate, which is highest in the last 18-month at 13.2% for the month against a decline of 0.1% in the previous month, mainly due to favorable base effect and pre-festive demand. Similarly, both components of consumer goods-durables and non-durables recorded a healthy expansion of 16.5% - the highest growth among the use-based categories and 10.1%, respectively.
Further, the growth pace of basic goods improved to 4.1% for the reporting month from 2.8% growth witnessed a month ago and 1.2% in year ago. This turnaround could be indicative of some improvement in the infrastructure space. On cumulative basis, basic goods recorded a growth of 3% for April-October period lower when compared to 6.3% growth in the corresponding months of the previous year. Even in the index of core industries, items such as coal, cement and fertilizers displayed a moderation in growth in October. Showing a sharp improvement in
the output, intermediate goods, recorded an accelerated growth of 9.4% in October from a sharp contraction of 8.4% in the same month a year ago, mainly on the back of considerable expansion seen in items like petrol and liquefied petroleum gas that account for about 11% of the intermediate goods sub-index. For the first seven-months, the growth stood at 2.3% as against a decline of 0.8% in the same period a year ago.
On the whole, industrial growth may have spurred optimism, partly on low base effect of last year and pre-festival sales demand, but the sustainability of the number remains a question to be answered. The HSBC manufacturing PMI improved to 53.7 in November from 52.9 in recorded in October. Owing to festive related demand, activity in the manufacturing sector showed buoyancy in the reporting month. Similar was the case with consumer goods segment, particularly consumer durables. However, the pace of growth nonetheless remains moderate when considered for the fiscal so far. Further, capital goods, which registered a positive growth in the reporting month, are unlikely to sustain in the approaching month, since the economy is still confronted by weak investment scenario. The performance in mining sector is also expected to be subdued, given the suspension of iron ore mining in Goa and in some regions of Odisha. Taking a view of this, notwithstanding the fact that the fundamental growth momentum still remains weak and the industrial output so far this fiscal has reflected the same, the industrial output may post a lower growth in the approaching month, given the waning of low base-effect.
Headline inflation moderates to 36-month low of 7.24% in NovemberHeadline inflation based on the wholesale price index (WPI) softened to a near 36-month low of 7.24% in November as against 7.5% in the previous month, mainly on account of moderation witnessed in fuel and manufacturing inflation. In spite of the rise seen in overall food inflation for the reporting month, the steep downtick recorded in non-food manufacturing inflation is a welcome sign, which in one way may prompt the Reserve Bank to cut rates at the earliest. Showing signs of moderation, inflation has been coming down from 8% recorded in August to 7.24% in the reporting month, notwithstanding, the fact that inflation reading for September month has been revised upwards to 8.1% from 7.8%. On the other, inflation based on the consumer price index (CPI), which also closely following the central bank, remained at a discomforting level of 9.9%, showing a different picture altogether.
Price-rise across product groups:
• Inflation related to non-food manufacturing products also termed as core inflation moderated steeply to 4.5% for the reporting month as against 5.2% in the previous month and 5.7% in September.
• Lower prices of naptha, light diesel oil, petrol & ATF led the fuel inflation to decline to 10% in November from 11.7% in the previous month and 12% in September.
• Mineral inflation moderated sharply to 7.6% in November from 13.7% in the previous month, mainly on the back of softening seen in prices of crude petroleum, copper and iron ore.
• Primary articles inflation jumped to 9.4% for the reporting month from 8.2% in the previous month, mainly due to rise in both its food and non-food component.
• Primary food inflation rose to 8.5% in November from 6.6% in the previous month, partly on base-effect and price-rise seen in fruits, cereals and poultry products. Similarly, Inflation for primary non-food items surged to 14% for the month against 10.8% in the October.
• Inflation related to manufacturing category softened to 5.4% in November as against 5.9% in the previous month, on the back of decline witnessed in its non-food component to 4.5% from 5.2% in the previous month.
• Overall food inflation including primary and manufacturing continued its uptrend and rose to 9% for the reporting month as compared to 7.7% in October.
From the above product groups, we could make out that pressure from the food inflation seem to be re-emerging, as price-rise in the segment has increased to 9.4% in the reporting month from 8.9% in the same month previous year, mainly on the back of supply-side factors along with delayed monsoons this year affecting production. Though
the food inflation number remains outside the purview of the monetary policy, it is still significant when seen as inflation as a whole. Going forward, unfavourable post-monsoon rainfall in December along with lower estimate of Kharif production, the food inflation is expected to rise further in the approaching month.
On the other hand, in sigh of big relief to the policy-makers, inflation related to manufacturing category moderated significantly from 9.5% in November 2011 to 5.4% in the reporting month, mainly on the back of low demand conditions prevailing in domestic as well as global, along with lagged impact of the rupee appreciation, which lowered imported inflation. Similarly, core inflation, the non-food manufacturing component of inflation, closely followed by the RBI to decide its policy stance, moved to a 24-month low level of 4.5%, declining for the third straight month. Further, inflation related to fuel and power group also moderated to 10.02% in November from 15.4% recorded in the same month previous year. However, going forward, prices are likely to see an uptrend, since the full impact of the diesel price hike is yet to factor in.
On the whole, inflation declined for the second successive month, mainly when expectations were of it going marginally higher. Moderation was particularly driven by lower inflation in fuel, manufacturing and non-food manufacturing category. Though, inflation based on WPI may have eased, the pickup in consumer price inflation to nearly double digits zone in the same month poses a concern. Going forward, inflation is likely to be over 7%, however movement in exchange rate and commodity prices will influence the inflation trajectory.
RBI’s Mid-Quarter Monetary Policy Review: Dec 2012Following a rather expected move with no surprises, the Reserve Bank of India (RBI) maintained status quo on rates against market expectations of a 25 basis point cut in the cash reserve ratio (CRR). On the other hand, with headline inflation easing for the second consecutive month in November and industrial activity firming up in October along with government’s continuing reforms agenda, the apex bank did not have any strong indicator to opt for monetary easing. Moreover, the positive optimism around the economy need to be treated with cautious approach, since much of the trend reversal has happened on the back of base-effect, which justifies the RBI’s stance.
Policy Rates
• Repo rate under the liquidity adjustment facility (LAF)
maintained at 8%.
• Reverse Repo rate and Marginal Standing Facility (MSF) Rate automatically stands unchanged at 7% and 9% respectively.
• Cash Reserve Ratio (CRR) remains unchanged at 4.25% of net demand and time liabilities (NDTL).
RBI’s Policy StanceContaining inflation has been the prime focus of the RBI over the last two years. So far in the current financial year, inflation has not gone to the level witnessed in the 2011-12 fiscal, remaining in the 7-percent range. Headline inflation moderated for the second consecutive month in November, mainly on the back of moderation in inflation of manufactured products mainly due to softening commodity prices and the lagged impact of rupee appreciation. Further, inflation remaining below the central bank’s estimated levels over the last two months supports the RBI’s anti-inflationary stance.
Going forward, the central bank’s policy stance is likely to shift towards supporting growth rather than containing inflation. Further, the RBI has reiterated its guidance given in the October policy review on monetary policy easing in the fourth quarter with a receding of inflationary pressures, so we could see a reversal in RBI’s stance in the last quarter. However, here we have to take a note that usually during this part of the year inflation shows a decline pointing to lower inflation trends going ahead. As a result, policy stance will more or less remain sensitive to inflation risks. Moreover, with temporary pressure expected to continue in the near term due to advance tax outflows, the apex bank is likely to continue open market operations to infuse liquidity in the system. On the whole, the central bank is expected to ease policy rates by 25 basis points in the January Policy, if the inflation continues as per recent readings.
Economy Article
RBI's Monetary Policy Stance
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D e c e m b e r January 2013
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Company Research
IDEA CellularInvestment overview
• Idea Cellular, a pan India 2G service provider leads the industry in terms of active subscribers. The company has substantially improved its combined revenue market share in Q2 in the 1800 MHz operations area.
• The company has been free cash flow positive since past five quarters and the second half of the fiscal is likely to be much stronger. The company’s 3G and VAS services are going to be a revenue driver going ahead.
Business Overview IDEA Cellular, an Aditya Birla Group Company is the 3rd largest mobile services operator in India in terms of mobility
revenues with subscriber base of over 117 million. Idea has consistently stayed ahead of the industry in VLR reporting, and has the 3rd highest base of active subscribers. Idea is a pan-India integrated GSM operator and has its own NLD and ILD operations, and ISP license. With traffic in excess of a billion minutes a day, Idea ranks among the Top 10 country operators in the world. Idea operates across all 22 service areas with 2G services and 3G services spread in over 3,000 towns and 10,000 villages. It has been the highest gainer of revenue market share since past four years. Idea ranks among top 10 cellular operators in the world with about 1.4 billion minutes of usage per day.
Idea has a network of over 97,000 2G and 3G cell sites covering the entire length and breadth of the country. It owns 9,302 towers, besides 11,094 towers transferred to Indus under IRU and over 70,000 km optical fibre cable (OFC) network. Idea has nearly 4,000 Service Centres servicing Idea subscribers across the country, including over 650 special Experience Zones for 3G promotion.
Idea’s service delivery platform is ISO 9001:2008 certified, making it the only operator in the country to have this standard certification for all 22 service areas and the corporate office.
The company provides host of services in all the area of telecom, Voice Based Services, Location Based Services, Connectivity Based Services and Market to Market Based Services. With the launch of 3G services, Idea has scaled up from being in the pure voice business to high speed wireless broadband services as well.
Financial HealthThe company has reported a rise of 158.93% in its net profit after tax at Rs 191.45 crore for the quarter ended September 30, 2012 as compared to Rs 73.94 crore for the same quarter in the previous year. Total income has increased by 14.19% at Rs 5226.57 crore for quarter under review as compared to Rs 4577.15 crore for the quarter ended September 30, 2011. The average realization per minute was flat at 41.3 paisa per minute against previous quarter ARPM of 41.2 paisa per minute. However, the company managed to exponentially improve non-voice revenue contribution to 15.6% this quarter.
On consolidated basis, the company has posted a rise of 126.97% in its net profit after tax at Rs 240.04 crore for the quarter ended September 30, 2012 as compared to Rs 105.76 crore for the same quarter in the previous year. Total income of the company has increased by 15.02% at Rs 5314.00 crore for quarter under review as compared to Rs 4619.92 crore for the quarter ended September 30, 2011.
Industry ScenarioIndia has one of the fastest growing telecom industries in
the world. It is the third largest telecom market in world after China and US. Historically, the telecom network in India was owned and managed by the government as it was considered to be a natural monopoly and strategically important service, best kept under the state’s control. However, after the government launched the deregulation drive in the 1990s, the telecom sector was also liberalized in a major way. The move was also influenced by experiences of some other developed and emerging countries where liberalization of telecommunications had resulted in better services and lower tariffs.
Telecom industry in India has undergone a revolutionary phase over the past few years with tremendous growth in the telecom subscriber base. Over the last few years, the Indian telecom market has shown explosive growth due to the policy initiatives undertaken by the government. The country’s telecom industry is one of the largest telecommunication networks in the world and one of the fastest growing. Moreover, with the introduction of advance services like 3G and WiMAX, along with the approval of National Telecom Policy (NTP), 2012, the industry has reached next level of revolution. With the ongoing investments into infrastructure deployment, the country is projected to witness high penetration of Internet, broadband, and mobile subscribers in near future.
The Indian telecom industry has grown at a dream pace in the new millennium. Private companies have taken a lead in a big way as declining tariffs and increasing disposable incomes help making telephones more affordable.
Investment Rationale Idea Cellular reported an over two-fold rise in consolidated net profit in the passing quarter. Total revenue of the company, which operates in 15 of the 22 telecom circles, increased by 15 per cent. During the quarter, the company added a total of 3,000 sites, including 1,900 2G and 1,100 3G, to take the total number to over 100,000. However, average revenues per user declined from Rs 155 to Rs 148 a month during the quarter. Its sequential quarterly revenues slid by 3.4 per cent from Rs 5,538.2 crore recorded in the June quarter. The overall wireless telecom business outlook for the quarter remained muted mired up in uncertain regulatory interventions, weak seasonal demand and continued battle for market supremacy. Still
the company funded the capex of Rs 972 crore, excluding forex fluctuation, for the quarter entirely out of cash profit of Rs 1,231 crore.
Idea’s spectrum profile is very attractive across all private operators. In the 900 MHz service area the company is having total revenue market share of 22.5% and ranks 1st and 2nd in 4 circles each. In 1800 MHz service area too, it is in close competition, ranking 3rd in three circles, 4th and 5th in one each, while it’s overall ranking stood at 2nd in the revenue market share. Further, the company started operations in 7 New Service Areas in 1800 MHz, with a focus on optimization. With continuous improvement in RMS, Idea is emerging stronger in the telecom circle. The company was having combined RMS of 3.3% in Q2FY13 and as the number of operators in the Indian market shrink, its new 1800 Mhz market offer good growth potential.
Company’s 3G investment plans are on track and high speed broadband services are now available in 3,500 towns (census and non-census) in its 20 service areas (including roaming arrangements). By the end of second quarter for the fiscal the company was having around 3.7 mn 3G subscribers with data ARPU of Rs. 87. In the last quarter company’s total non-voice revenues contributed to 15.6 per cent against 13.2 per cent in same quarter last year and revenues from 3G services accounted for 5.4 per cent of total revenue. Going further its Existing 18 mn 2G data subscribers & growing, offer excellent long term 3G upgrade opportunity as out of the total, 115 million subscriber base use mobile data services, contributing 5.4 per cent of the total service revenue.
At the CMP of Rs 103.70, Idea Cellular is trading at TTM P/E of 37.61x and EV/ EBITDA of 8.55x, we recommend ‘HOLD’ and buying at dips in the scrip with a price target of Rs 120. The second quarter was not that good for the company but September quarter is seasonally weak and in coming quarters Idea looks committed towards gaining revenue market share and participating in evolving wireless broadband business. The company is also likely to get the 3G advantage with its existing wide subscriber base. Since past 5 quarters Idea has been free cash flow positive and the second half of the fiscal is likely to be much stronger for the company as it has increased tariff rates by 20% and consequently the revenue and operating profit are likely to show improvement.
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Stock Update
w Tata Communications is a leading global provider of a new world of communications. With a leadership position in emerging markets, Tata Communications leverages its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and Indian consumers.
w The company is looking at expanding into newer geographies, building new products & solutions and strengthening its business development efforts, particularly for building the company’s enterprise customer base outside India .
w The company has committed a limited amount of expenditure in the region of $250-300 million. The majority of the investments are directed at the company’s Data business while the Voice business actually sees very meager maintenance capex. The company’s major thrust as far as the data center business is concerned is to expand its footprint in India.
w The company has cut down 300 jobs across global operations as part of its review to align business with current business need. The company has made some organizational changes in order to better align the company to its current and future business requirements.
w The company has reported 61.26% fall in its net profit at Rs 23.97 crore for the second quarter ended September 30, 2012 as compared to Rs 61.88 crore for the same quarter in the previous year. However, total income of the company has increased by 9.63% at Rs 1154.70 crore for quarter under review as compared to Rs 1053.22 crore for the quarter ended September 30, 2011. The scrip is currently trading at Rs 235.50 and a P/E multiple of 32.62x, we would recommend ‘BUY’ in the stock as the company is realigning its businesses and is focusing on cost reduction across the portfolio.
w Bharti Airtel is a leading integrated telecommunications company with operations in 20 countries across Asia and Africa. The company ranks amongst the top 5 mobile service providers globally in terms of subscribers. The telecom company has lost about 2.80 million users in November. Following this, the company’s total customer base stood at 183.61 million.
w The company’s product offerings include 2G, 3G and 4G services, fixed line, high speed broadband through DSL, IPTV, DTH, enterprise services including national & international long distance services to carriers. In the rest of the geographies, it offers 2G, 3G mobile services.
w For a total outlay of Rs 156 billion the company has won 3G spectrum in 13 circles and BWA spectrum in 4 circles, which will support voice decongestion as well as development of new revenue streams from data services in the maturing urban market.
w The company is looking for a South African partner again, three years after its failed bid to link up with local giant MTN. The company is planning for expansion on the African continent after it gained a presence in 15 north, west and east African countries. The entity aims to make a bid for either Cell C, the third largest mobile company in South Africa or latest entrant 8ta, an offshoot of former state monopoly Telkom.
w The company has reported 37.02% rise in its net profit at Rs 1791.60 crore for the quarter ended September 30, 2012 as compared to Rs 1307.50 crore for the same quarter in the previous year. Total income of the company has increased by 19.46% at Rs 12318.60 crore for quarter under review as compared to Rs 10312.10 crore for the quarter ended September 30, 2011. The scrip is currently trading at Rs 316.80 and at a P/E multiple of 19.24, we would recommend a ‘BUY’ in the stock, as it being a fundamentally strong stock has a good future prospects.
Aurobindo Pharma receives USFDA’s nod for Nafcillin InjectionsAurobindo Pharma has received final approvals from the US Food & Drug Administration (USFDA) to manufacture and market Nafcillin for Injection USP, packaged in 1g and 2g vials and Nafcillin for Injection USP 10g/Vial Pharmacy Bulk Package. The products are ready for launch. Nafcillin for Injection is a sterile semisynthetic penicillin (SSP) indicated in the treatment of infections caused by penicillinase-producing staphylococci which have demonstrated susceptibility to the drug. It may be used to initiate therapy in suspected cases of resistant staphylococcal infections prior to the availability of susceptibility test results. These ANDAs have been approved out of Unit XII formulation facility in Hyderabad, India and will be marketed and sold by Aurobindo’s US subsidiary AuroMedics Pharma LLC.
ONGC’s Gujarat gas fields report highest natural gas production in NovemberState run, Oil & Natural Gas Corporation’s (ONGC) Gujarat gas fields has reported highest natural gas production in the month of November. It has registered 153.992 million cubic meters (mcm) of natural gas from its Gujarat assets during November, up by 160% of the planned production of 95.87 mcm. This is the highest production achieved among other exploration companies in the country. The company’s production stood at 1930.374 mcm (including offshore production) against planned production of 1952.120 mcm, in November, while cumulative total natural gas production by ONGC for the period April-November stood at 15723.858 mcm. Moreover, the entity has reported total natural gas production by all the exploration players put together at 28043.591 mcm, higher by over 2% from the planned 27468.661 mcm for the period.
Aditya Birla Nuvo gets CCI’s nod to acquire Pantaloon brandAditya Birla Nuvo has received Competition Commission of India’s (CCI) approval to takeover Future group’s Pantaloon brand. Aditya Birla Nuvo, through its subsidiary, has proposed to acquire a majority of Pantaloon format business from Kishore Biyani-led Future group. As a part of the deal between the two companies, the Pantaloon format would be demerged from Pantaloon Retail India (PRIL). Earlier in August, CCI had termed as invalid an application seeking nod for this takeover deal as the final deal was yet to be approved by the boards of the concerned companies at that time.
Lanco lnfratech’s arm gets Australian SC nod to enter into revised CSALanco lnfratech’s subsidiary - Griffin Coal Mining Company
(GCMC), has received the order from Supreme Court (SC) of Western Australia whereby SC in its judgment has allowed GCMC to enter into revised coal supply agreement (CSA) with the Griffin Power entities which is in process of being acquired by Japanese consortium of Sumitomo Corporation and Kansai Electric Power Company. The Supreme Court of Western Australia has rejected the contention of Perdaman Chemicals and Fertilizers (PCFL). The revised CSA will result in a gain of approximately AUD 150 million in NPV terms, including a substantial upfront payment to Griffin Coal Mining Company. Lanco Infratech through its Australian subsidiary, Lanco Resources Australia, had acquired Griffin Coal Mining Company and Carpenter Mine Management for AUD 720 million in February 2011. Last year Griffin produced over 3 million tonne of coal.
HCC JV bags order worth Rs 230.98 croreHindustan Construction Company (HCC), in joint venture (JV) with Coastal Projects, has bagged project worth Rs 230.98 crore from Northeast Frontier Railway to develop a railway tunnel between Kaimai road and Kambiron road stations on the new railway being developed between Jiribam and Tupur in Imphal. The contract is expected to be completed within 28 months. The project scope comprises construction of single line broad gauge tunnel with length of about 4.9 Km including earthwork, slope protection and stabilization, RCC portal walls, permanent tunnel support, construction of side drains, rock supporting system and ancillary work.
Sesa Goa acquires remaining 49% stake in Western ClusterSesa Goa has acquired the remaining 49% of the outstanding common shares of Western Cluster (WCL) from Elenilto Minerals & Mining LLC, Delaware, for a cash consideration of $33.5 million. Post this transaction, the company’s shareholding in WCL has been increased to 100%. WCL is a logical and strategic fit with Sesa’s existing iron ore business and is expected to create significant long term value for all stakeholders. At WCL, exploration activities are progressing well, with over 42,000 meters of drilling completed till 30 November 2012. The project is on track for first shipment in FY2014.
Gulf Oil concludes acquisition of 100% stake in Houghton International IncGulf Oil Corporation (GOCL), a Hinduja Group Company, through a step down subsidiary structure in the United Kingdom and USA, has completed acquisition of 100% stake in Houghton International Inc. for $1.045 billion,
D e c e m b e r January 2013
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Corporate News
after satisfactory conclusion of regulatory approvals. The debt will be serviced through Houghton International Inc’s cash flows. This acquisition will make Gulf the world’s 9th largest lubricant company, fits extremely well with Gulf’s existing Lubricant portfolio and makes it a full range Lubricants company serving customers from Automotive, Metal working to Energy, Aerospace and Marine. On the other hand, Houghton has a very strong Industrial portfolio, which perfectly complements Gulf’s very strong presence in the Automotive Lubricant sector.
Reliance Power’s promoters successfully offloads 5.42% stake in the companyReliance Power’s promoters (RPL) - Reliance Infrastructure along with other promoter group companies - Reliance Innoventures and AAA Project Ventures, has successfully offloaded 5.42% of the share capital of RPL through an Offer for Sale (OFS). The OFS received bids worth approximately Rs 2,300 crore, and was over-subscribed nearly 1.6 times from a large number of foreign and domestic institutional and other categories of investors. The transaction was completed at a price of Rs 95 per share on a proportionate allocation method, resulting in gross sales proceeds of approximately Rs 1,500 crore. Axis Capital acted as the sole selling broker for the OFS.
Punj Lloyd Group bags order worth Rs 1168 croreSembawang Engineers and Constructors, (Sembawang) a Punj Lloyd Group company has won Project in Hong Kong to construct MTR Corporation’s Shatin to Central Link Diamond Hill Station. The project worth over $260 million (Rs 1,168 crore) will be executed by Sembawang along with consortium partner, Leader Civil Engineering Corporation. The station will provide an important interchange between the new Shatin to Central Link and the existing Diamond Hill Station servicing the Kwun Tong Line. The scope of work includes the relocation of heritage structures and archeological diggings required to facilitate the site, construction of a 250 metre long by 30 metre deep underground station and connecting adits to the existing station, together with coordination with interfacing railway operating systems and specialist contractors. Modifications to the adjacent existing live station will also be required to aid the flow of passengers between the Kwun Tong Line and the Shatin to central Link. Strict environmental controls and attention to public relations will also be an important aspect of the project as the station is to be constructed in a heavily populated older area of Eastern Kowloon.
Lupin’s subsidiary receives USFDA approval to launch generic Yasmin tabletsPharma major, Lupin’s subsidiary, Lupin Pharmaceuticals Inc (collectively Lupin) has received final approval for its
Drospirenone and Ethinyl Estradiol Tablets, 3 mg / 0.03 mg from the United States Food and Drugs Administration (USFDA) to market a generic version of Bayer Healthcare’s (Bayer) Yasmin Tablets 3 mg / 0.03 mg. Lupin’s Drospirenone and Ethinyl Estradiol Tablets are the AB rated generic equivalent of Bayer’s Yasmin Tablets 3 mg / 0.03 mg. Lupin’s Drospirenone and Ethinyl Estradiol Tablets are a combined oral contraceptive indicated for the prevention of pregnancy in women who elect to use oral contraceptives as a method of contraception. Lupin will be marketing its Drospirenone and Ethinyl Estradiol Tablets USP in a wallet pack of 28 tablets consisting of 21 yellow active tablets, each containing 3 mg Drospirenone and 0.03 mg Ethinyl Estradiol, and 7 white inert tablets.
M&M to purchase Navistar’s stake in Indian truck businessMahindra & Mahindra (M&M), India’s leading SUV manufacturer has decided to purchase Navistar International Corp’s two joint ventures in the country, in a $33 million deal as the Navistar International is planning to sale its underperforming businesses. Through this initiative, Navistar is cutting costs and weighing asset sales, targeting savings of up to $175 million next year as it looks to turn around its struggling business. The sale requires regulatory approval in India and is expected to be completed early next year.
Biocon enters into collaboration with CCM PharmaceuticalsBiocon has entered into collaboration with CCM Pharmaceuticals, a subsidiary of Chemical Company of Malaysia, whereby the India’s premier biotechnology company has granted CCM an exclusive licence and distribution rights for its insulin products in Malaysia and Brunei. Both the companies are targeting an insulin market of around close to Rs 160 crore. Besides, this collaboration has given the Bangalore-based biotechnology firm a second partner to market its insulin products. Earlier this year, US drug maker Pfizer had scrapped an arrangement to sell Biocon’s injectable insulin products.
Sun Pharmaceutical’s arm acquires URL generic business from TakedaSun Pharmaceutical Industries’ - wholly-owned subsidiary - Caraco Pharmaceutical Laboratories (Caraco), has entered into a definitive agreement with Takeda Pharmaceuticals USA, Inc, a wholly-owned subsidiary of Takeda Pharmaceutical Company, to buy the URL Pharma, Inc’s generic business. Upon completion of the purchase, the non-Colcrys (colchicine, USP) generic assets of URL Pharma will be owned and managed by Caraco. The deal is however subject to satisfaction of customary closing conditions, including applicable regulatory approvals.
December
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Market Snapshot
Indian markets went through a huge round of volatility during the final month of the calendar year, however finally they bid-adieu to the year 2012 on a solid note making a year of smart gains for the investors. The best part of the year was that the Indian stocks outperformed the traditionally best performing investment option ‘gold’ by giving a return of over 25 percent, ignoring all odds such as dwindling industrial output, declining exports, ballooning fiscal deficit and uncertainty over the US fiscal cliff. Foreign institutional investors (FII’s) have pumped in over $20 billion of portfolio flows, highest in the last few years, helping the Indian equities to make a sharp rebound. For the month of December too, which has generally seen an exodus of foreign investors, the trend remained quiet encouraging and when the domestic fund houses were selling, the foreign investors continued lapping up the Indian shares imbibing faith in the Indian growth story. The start of the month was not that enthusiast and traders looked concerned hoping that if the FDI in retail vote goes over successfully, then only markets will gain confidence that reform measures are indeed getting through the Parliament. However, government looked confident before the debate and vote in Lok Sabha, saying that it would also get the amendments to the Foreign Exchange Management Act (FEMA), required to facilitate FDI in multi-brand retail, passed in both houses, if needed. Though, there were some good economic reports, core industries’ output grew 6.5% in October 2012, much better than the 0.4% growth recorded in October last year. During April-October 2012-13, the cumulative growth rate of the core industries was 3.7% as against their growth at 4.3% during the corresponding period in 2011-12. The growth spike in October was largely attributed to the robust output growth in coal (10.9 per cent) and petroleum refinery products (20.3 per cent). While, the seasonally adjusted HSBC Purchasing Managers’ Index, a composite indicator of operating conditions in the manufacturing economy posted a good advancement in November, surging to their five-month high to 53.7 from 52.9 in October. However, the good numbers dampened the hopes that RBI will be going for any rate cut soon. Traders were also concerned about the economy after global credit rating agency Fitch warned that a loosening in fiscal policy ahead of the 2014 elections could further weaken India’s public finances and fiscal slippages in the run-up to 2014. Also, the CPI inflation accelerated at the fastest pace in three months to 9.90 percent in November, 2012 and added pressure on the markets, expecting a rate cut in RBI’s ensuing monetary policy review and that was the reason the markets overlooked the index of industrial production (IIP)
data, a key measure of industrial output which expanded at its fastest pace in 16 months at 8.2% in October versus a contraction of 0.4% in September. Around in the mid of the month, there was a sudden surge in the markets which took the indices back to the high points of the month on Reserve Bank of India’s positive undertone in monetary policy review as in a clear signal that the focus of the monetary policy will now shift to growth, in the report the apex bank stated, ‘recent inflation patterns and projections provide a basis for reinforcing our October guidance about policy easing in the fourth quarter.’
BSE Sensex movement for the month of December
• Bracing for tough times ahead, Tata Motors has embarked on a major belt tightening exercise. The company is making efforts to tide over a market dip in demand for its key commercial vehicles business. Karl Slym, the new managing director of Tata Motors, has asked departments to reduce spend and to rationalise travel, stay and even curtail production operations and certain spends on product development. He has urged that employees should make better use of technology-enabled conference rather than face-to-face meetings. The measures are not restricted to Indian operations. Even international subsidiaries like Tata Motors Thailand are undertaking measures to cut down the cost. Tata
Motors as the market leader is impacted the most due to extraneous factors such as severe curtailment of mining and a slowdown in infrastructure spends.
• Hindalco will receive $100 million in financing from Export Development Canada or EDC, the country’s export credit agency, for its Mahan Aluminium Project in Madhya Pradesh. The agreement, signed a few days ago, will support the supply of technology and capital equipment to the project by subsidiaries of Canada’s Rio Tinto Plc, operating under the umbrella of Aluminum Metals Group of Rio Tinto Plc. The Mahan Aluminium Project consists of a359-ktpa aluminium smelter and a 900-Mw captive thermal power plant. The project was classified as Category-A by EDC. EDC develops and supports Canada’s exports by providing insurance and financial services to Canadian exporters and investors and their international buyers.
• Bharti Airtel has lost about 2.80 million users in November. Following this, the company’s total customer base stood at 183.61 million. In the previous month it added about 0.49 million mobile subscribers. India’s biggest wireless telephone company, Bharti Airtel, is set to start a debt restructuring plan and is talking to key bankers to raise funds from abroad by the first quarter of 2013. The company is looking to raise up to Rs 5,500 crore from the overseas markets to swap with its local loans. Bharti Airtel is talking to Mitsubishi Bank to raise funds from the Japanese market and has given the mandate to the Japanese bank to tap local sources of funds.
• India’s leading software services provider, Infosys is likely to slash its revenue forecast next month as US business clients defer spending and cringe at signing big deals. The company, which has missed its own revenue guidance in three of the past four quarters, has struggled as its big customers trimmed costs and
has been criticized for sticking with a rigid pricing policy when competitors have offered more flexible plans. With over 60% of its business in the United States, the company is mainly exposed to swings in US corporate sentiment and has been hit hard by spending deferrals. Further, longer-than-expected client shutdowns due to Hurricane Sandy and looming fiscal cliff are also hurting its guidance for the year.
The second half of the month remained really volatile with the markets witnessing alternate extreme bouts of gains and losses. The major disappointment coming from the Reserve Bank of India, which not only left the policy rates unchanged but even the much anticipated CRR. Also, pitching the need for supportive monetary and fiscal policies to perk up investor confidence, the government lowered the growth projection for the current fiscal to 5.7-5.9% from 7.6% estimated earlier and said that the growth rate in the second half of the current fiscal would be close to around 6%. Though there was some recovery on hopes that if the RBI has not gone for a rate cut this time, it will surely cut rates in new year when the central bank meets for the third-quarter review of its policy on January 29. There was some jubilation in the major financial sector after the parliament passed the banking bill, paving way for foreign investments in the sector and establishment of new private banks. There was some cautiousness as well as the Planning Commission for the second time proposed reduction in the average annual growth target for the 12th Plan from 9 per cent to 8.2 per cent and now to 8 per cent. Also the Chief Economic Advisor Raghuram Rajan said that to achieve the revised fiscal deficit target of 5.3 percent of GDP, government needs to take more painful decisions and the diesel price hike and cut in subsidised LPG cylinders are only the preliminary steps to keep the subsidy bill under check.
The F&O December series despite ending higher by over half a percent remained range bound, there was some short covering seen on the penultimate day. Nifty rolls were observed at 61.58%, lower than the 3 months average of 66.29%, while the market wide rollover was higher at 82.44% against 3months average of 82.03% indicating some bullishness in the market. The January series started with futures open interest of 16.5 million shares, lower than last series, while the current open interest too was lower than three month average open interest at inception. The sectors that showed strongest rollover were telecom, pharma, infrastructure and finance, while Oil & Gas, metals and automobiles witnessed comparatively lower rollover in the January series.
BSE Sensex Monthly Losers
Company Prev Price (Nov 30’12)
Last Price (Dec 31’12)
Change (%)
Bharti Airtel 337.15 316.8 -6.04
Infosys 2436.6 2318.5 -4.85
TCS 1312.85 1258.55 -4.14
ITC 298.25 286.8 -3.84
Larsen & Toubro 1667.1 1605.85 -3.67
December
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Economy News
Govt announces sops for exporters; 2% interest subsidy extended till March 2014To boost the declining exports and bring down the surging trade account deficit, the government announced a slew of measures to boost exports. Among the incentives include extension of 2% interest subsidy for one more year till March 2014 and additional incentive on incremental exports, which would be made during January-March 2013 over the base period January-March 2012. However, it would not include deemed exports, service exports, third party exports, export-turnover of SEZ units etc. The government has also decided to introduce a pilot scheme of 2% interest subsidy for project exports through EXIM Bank for countries of SAARC region, Africa and Myanmar.
Commerce and Industry Minister Anand Sharma said, ‘with these incentives, we will be able to give a push to exports in the last quarter of this fiscal. The objective is to stabilize the situation and move from negative territory to positive and keep the trade deficit in control.’ Further, the government is also extending the period of interest subvention on certain specific sectors like handicrafts, carpets, handloom sports goods and toys among others. By adding further, Sharma said, all these sectors are directly linked to job-creation. Moreover, government’s efforts for market diversification to Africa, the ASEAN and South Amercias have paid dividends with the trade touching $65 billion.
Five new countries, New Zealand, Cayman Islands, Latvia, Lithuania and Bulgaria have been added under the Focus Market Scheme (FMS), while Eritrea has been added under the Special Focus Market Scheme. Under FMS Duty Credit of 3 per cent is given on the FoB value of exports, while under special FMS the Duty Credit is 4 per cent. Further, sixty new products and three countries viz; Taiwan, Thailand and Czech Republic have been incorporated under the Market Linked Focus Product Scheme.
Textile Exports decline by 6% in September quarterIndian textile exports declined 5.9 per cent year-on-year in the September quarter mainly because of slowdown in major markets like the US and EU. In the first six months of the 2012-13 fiscal, textiles exports stood at $14.18 billion. To boost textile exports, the government has reviewed the export norms of the sector under the Foreign Trade Policy 2012-13. The benefits includes extension of 2 per cent interest subsidy for handicrafts, handlooms, carpets and SMEs till March 31, 2013 and expanding coverage to garment. Also, Market Linked Focus Product Scheme has been extended for the exports to the US and EU.
Apparel exports for the month of October 2012 were to the tune of $907 million, reporting a decline of 0.75 percent against the corresponding month of last financial year. US witnessed decline of 2.07 percent in Jan-Sep from the corresponding period of previous year and amounted to $59 billion. For the same period, US imports of apparel from India declined by 11 percent and reached $2420 million against $2727 million in Jan-Sep 2011. For development of the textiles industry, the government has allocated Rs 25,931 crore in the 12th Five-Year Plan (2012-17), almost double of Rs 14,000 crore in the 11th Plan.
EGoM reduces 2G auction base price by 30%Perturbed by the weak response of the much-hyped recently concluded 2G auctions, the Empowered Group of Ministers has decided to reduce the reserve price for spectrum by 30 per cent for spectrum in Delhi, Mumbai, Rajasthan and Karnataka, the four circles which did not receive any bids in the recently concluded auction. Now the inter-ministerial panel would seek the Cabinet’s approval on the reduced base price for unsold airwaves in Delhi, Mumbai, Karnataka and Rajasthan.
The whole auctions turned out to be a damp squib, with the government getting less than a fourth of its revenue target of Rs 40,000 crore and much lower than the expected target of minimum Rs 28,000 crore, as there were no takers for about 57% of the airwaves put on sale and it failed to attract even a single bid for 2G airwaves in the 1800 MHz band in these four regions.
The government had fixed a reserve price of Rs 14,000 crore per 5 MHz of spectrum. The reserve price for Delhi was fixed price at Rs 693.06 crore for a slot of 1.25 Mhz in the 1800 Mhz band. The price for Mumbai, Karnataka and Rajasthan was fixed at Rs 678.45 crore, Rs 330.12 crore and Rs 67.08 crore respectively.
The EGoM has also decided to simultaneously auction spectrum in the 900 MHz band in Delhi, Mumbai and Kolkata. However, the reserve price for this spectrum band will be twice of the 1800 Mhz band, as it is considered to be more efficient and cost effective compared to the 1800 Mhz band. However, no decision on 800 MHz was taken; the minimum price for these airwaves had been set at 1.3 times that of GSM spectrum in the 1800 MHz band.
Foreign telecom players cannot claim damage for 2G licenses case: AGGiving a setback to foreign telecom investors, highest law official in the country Attorney General Goolam Essaji Vahanvati said that foreign investors in mobile phone companies whose licenses were cancelled by the Supreme Court in its Feb 22 orders can’t claim damages
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Economy News
for cancellation of their 2G licenses.
The attorney general has further said that claim of damages of these companies was based on a complete misunderstanding of the constitutional position prevailing in the country. Reiterating his stance, Vahanvati said that countries entering into bilateral agreements ‘ought to have been fully aware of the constitutional set up of the country, where the Parliament has the powers to make laws, and the government of India in its executive powers can enter into treaties’.
The global investors were Norway’s Telenor, Russia’s Sistema, Capital Global and Axiata Group, who had submitted notices to the Indian government for alleged breach of bilateral investment protection agreements after the apex court quashed their mobile permits.
However, the Ministry of External Affairs (MEA) and the Department of Commerce has not agreed to Vahanvati’s opinion and expressed views on this stance that foreign companies can take legal action against the government and claim damages under the bilateral investment protection pacts (BIPA). Further, they added that according to international law the Indian State is a single entity and the conduct of any authority is attributable to the State of India.
India’s services PMI drops to slowest rate in 13 monthsComing in sharp contrast to the manufacturing PMI, India’s services sector logged a growth that is at its weakest pace in over a year during November. The HSBC services Purchasing Managers’ Index (PMI), fell to 52.1 in November from October’s 53.8, registering a 13-month low and suggesting an economy limping towards its slowest growth for the year in a decade. The HSBC India Composite Output Index posted 53.2 in November, slightly down from 53.5 in October.
The report pointed out that though, manufacturing and services firms both signaled higher employment, the overall rate of job creation was only minor and the payroll numbers were increased just to meet production requirements. Manufacturing and services companies both recorded increases, although power shortages hampered manufacturing production. Services firms linked growth in new orders to rising demand, increased marketing and maintained quality of services.
November data signaled persistent inflationary pressure in the Indian private sector as input and output prices both increased. However, optimism which stood at three months high was signaled in the Indian service sector during November.
FIPB clearance must for FDI in domestic pharma unitsAmid growing concerns over availability of affordable essential drugs in the wake of global firms acquiring local companies, the government has decided that all foreign investments in existing domestic Pharma firms should be allowed only after clearance by the Foreign Investment Promotion Board (FIPB). Any foreign company acquiring an Indian firm, which had been producing essential medicines, would have to continue to do so till the time the Competition Commission of India (CCI) was empowered to vet such deals and views on such mergers and acquisitions.
The decision was taken at a high level meeting chaired by the Prime Minister Manmohan Singh that was attended by the Finance Minister P Chidambaram, Commerce and Industry Minister Anand Sharma and Health Minister Ghulam Nabi Azad.
The amendment to the Competition Act 2002 was approved by the Cabinet in October this year; the government is checking the legality of inserting new sectoral specific clauses in the Act so that the CCI could direct foreign firms to produce a specific quantity of essential medicines after acquiring an Indian company. Moreover, it is also being examined whether the threshold limit for foreign investment in Brownfield projects that would require CCI clearance should be revised from the existing about Rs 750 crore limit.
India’s manufacturing PMI grows at five-month high in NovemberIndicating further improvement in the health of the Indian manufacturing sector, the seasonally adjusted HSBC Purchasing Managers’ Index, a composite indicator of operating conditions in the manufacturing economy posted a good advancement in November, surging to their five-month high to 53.7 from 52.9 in October.
With this numbers, Indian goods-producing sector has shown output growth advancement for the forty-fourth consecutive month, backed by increase in order book volumes combined with a depletion of post-production inventories.
As per the report, new orders and export sales both increased at manufacturing companies in India during November. While, order book volumes showed fastest expansion since June, the new export orders reported sharpest growth in last five months. Demand was reportedly stronger in both domestic and international markets. In line with higher input costs, prices charged by manufacturers too increased during November.
Scorecard Legends : NOM - Number of Months for which P& L a/c is prepared by the companies, Equity Rs.Mn - Latest Paid Up Capital of the Company, FV-Latest Face values of equity Shares, Promoter Stk % - Its promoter holding in the equity capital of the company as per latest shareholding pattern, BV Rs. - Book Value Per Share is calculated as (Equity + reserves ) / No of Equity shares, RONW - Return on Net Worth is calculated as {(Net profit - preference capital)/ Shareholder’s Fund }*100.Share- holders funds includes Equity Paid Up + Reserves excluding revaluation reserves - Misc Expenditures Not written off, Sales Rs. Mn - Sales , Turnover & Income from operations,Sales Var% - Percentage Change in Sales over previous period Sales, OPM% - Operating Profit after interest expended as a % of Interest income & income from operation, NP Rs. Mn - Net Profit as reported after Tax, NP Var% - Percentage Change in Net profit over previous period Net profits, Div% - Total % of Dividend Declared during latest Financial year.
Scorecard : Telecom
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CPS Rs. - Cash Profit per Shares, EPS Rs. - Earning Per Shares is calculated as Net Profit / Number of Equity Shares, Sales Rs. Mn - Sales ,Turnover & Income from operations for Latest Quarter, Sales Var% - Percentage Change in Sales for Latest Quarter over previous Corresponding Quarter Sales, OPM% - Operating Profit after interest expended as a % of Interest income & income from operation for Latest Quarter,NP Rs. Mn - Net Profit as reported after Tax for Latest Quarter,NP Var% - Percentage Change in Net profit for Latest Quarter over Previous quarter Net profits, Ended - Trailing Twelve months Ended On, TTMEPS - Earning Per Shares is calculated as TTM Net Profit / Number of Equity Shares,TTMNP Var% - Percentage Change in TTM Net profit over Corresponding previous TTM Net profits, H52 - High Price during last 52 Week,L52 - Low Price during last 52 Week,PE - Market Price / TTM Earning Per Shares,Market cap Rs.Mn - Market Capitalisation is calculated as Latest price multiplied by No of Equity Shares outstanding.
EPS Earning Per Shares is calculated as Net Profit / Number of Equity Shares (Rs)FV Latest Face values of equity Shares (Rs)PE Market Price / Trailing Twelve Months Earning Per Shares
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Low PE
Company Name Year End Price (31/12) Rs. EPS FV PEGlodyne Technoserve Ltd. 201203 25.15 57.13 6 0.44
EPS Earning Per Shares is calculated as Net Profit / Number of Equity Shares (Rs)FV Latest Face values of equity Shares (Rs)PE Market Price / Trailing Twelve Months Earning Per Shares
OutlookFranklin Build India Fund (Growth) is Franklin Temple-ton Asset Management managed open-ended Equity - Infrastructure scheme, being managed by Anand Rad-hakrishnan and Roshi Jain. The fund focuses on innova-tive businesses, quality of management as well as out of favor stocks that have strong business fundamentals and model to sustain high growth rates over the long-term. Its investment is oriented towards structural themes and not cyclical themes comprising companies across the market capitalization range. This fund is suitable for investors with moderate to high risk profile given its orientation towards multiple growth themes.
Duration 1 Week % 1 Mth % 3 Mth % 6 Mth % 1 Year % 3 Year % 5 Year % Since Inc. %Scheme Return % 2.28 3.60 8.89 20.07 39.91 5.66 NA 9.59Category Avg % 1.54 1.72 2.75 9.67 25.45 -3.40 -7.75 2.21
Market cap-wise Allocation StyleAverage Mkt Cap (Rs Cr) 39963.72Market Capitalization % of Portfolio Large 67.27Mid 11.40Small 12.44Note: Large-Cap = 5000 Crs. and above, Mid-Cap = 2000 Crs. to 5000 Crs. and Small-Cap = less than 2000 Crs.
Franklin Build India Fund (G)Franklin Build India Fund (Growth) is Franklin Templeton Asset Management (India) managed open-ended Equity – Infrastructure scheme.
The fund was launched on September 4, 2009 and its fund managers are Anand Radhakrishnan and Roshi Jain.
The benchmark index of the fund is S&P CNX 500 and the custodian of the fund is Citibank N.A.
The current net asset value (NAV) of the fund as on December 31, 2012 was Rs 13.56; while the 52 week high NAV was Rs 13.56 on December 31, 2012 and the 52 week low NAV for the scheme was Rs 9.68 on January 2, 2012.
The minimum investment to the fund is Rs 5000 and additional investments can be made in multiples of Rs 1000.
The investment objective of the scheme is to achieve capital appreciation through investments in companies engaged either directly or indirectly in infrastructure-related activities.The top five holdings of the fund are:
As far as market capitalization-wise companies are con-cerned, the scheme’s portfolio consists of 69.27% from Large-cap, 11.40% from Mid-cap and 12.44% from Small-cap stocks.
The fund has given a return of 9.59% since inception and a return of 39.91% in last one year, while the category average in the same period has been 2.21% and 25.45%
Short TermBirla Sun Life Ultra Short Fund 875.64 137.40 0.71 2.18 4.58 9.80 8.29 - 7.06 5-May-08HDFC MIP Short Term 252.33 19.52 1.40 2.54 5.88 12.34 6.86 6.66 7.69 26-Dec-03Reliance Short Term 2491.09 21.39 0.73 2.13 5.08 9.75 7.55 8.71 7.88 23-Dec-02
Monthly Income PlansBirla Sun Life Monthly Income 210.77 30.45 0.98 2.77 6.57 12.59 7.44 6.56 9.62 20-Nov-00Reliance MIP 3341.96 25.30 1.11 3.10 7.25 16.67 8.19 10.94 10.87 13-Jan-04DSP Black Rock MIP 406.69 22.72 1.19 2.78 7.23 15.17 7.51 7.72 10.06 11-Jun-04HDFC MIP Long-term 5035.79 26.36 2.07 3.09 7.33 15.50 8.30 8.78 11.34 26-Dec-03
Long TermBirla Sun Life Dynamic Bond 14481.44 19.40 0.85 2.25 5.29 10.47 8.41 9.49 8.35 30-Sep-04IDFC Dynamic Bond Plan A 935.55 22.92 1.43 2.72 5.68 10.77 8.27 9.32 8.20 25-Jun-02DSP Black Rock Bond-Retail 68.64 36.54 1.19 2.38 5.33 9.28 6.60 6.96 8.61 29-Apr-97
Flash crash and SEBI’s latest initiatives The Securities and Exchange Board of India (SEBI) announced a series of measures to prevent flash crash. It has asked exchanges to put an upper limit on a single order at Rs 10 crore and also decided to tighten the dynamic price band around a stock that will stretch only 10 per cent either way. This means no order of above Rs 10 crore will be accepted by the stock exchange for execution in the market. The dynamic price band is tighter than the circuit filters that exchanges apply on stock prices daily. The new band will also be applicable on index futures and stock futures. Sebi has however said that in case of a market trend in either direction, the dynamic price bands shall be relaxed by the stock exchanges in increments of 5 per cent.
The measures are a response to the possibility of flash crashes like the one which happened on October 5, 2012 at the NSE. Trading on the National Stock Exchange (NSE) was briefly halted after the 59 trades worth more than $6.5 billion were placed, triggering a sudden drop of more than 900 points on the Nifty index, raising renewed concerns about the stability of trading systems after a series of global market glitches. Emkay, a financial services firm founded 17 years ago, entered orders that led to trades valued at Rs 6.5 billion ($125 million) causing the drop, later it closed out all the positions from the misplaced trades. The incident occurred on a day when expectations were high for an upward rally on bourses, following some big-ticket reform measures approved by the government the previous evening, including on FDI in sectors like insurance and pension.
Trading at both exchanges takes place through an open electronic limit order book, where order matching is undertaken by the trading computer. The entire process is order-driven, meaning market orders placed by investors are automatically matched with the best limit orders and buyers and sellers remain anonymous. The order- driven market brings more transparency by displaying all buy and sell orders in the trading system, though there’s no guarantee that orders will be executed because of the absence of market makers. All orders must to be placed through brokers, many of which provide online trading facilities to retail customers. Institutional investors can gain direct market access through trading terminals provided by brokers for placing orders directly into the stock market trading system.
Later, Emkay Global Financial Services admitted an error on its part for the 900-point flash crash of the NSE index
Nifty, and said it would help the stock exchange in probe into the matter. In a clarification to the stock exchanges, Emkay Global said, “On October 5, while executing an order to transact a Nifty cash basket, in Nifty-50, a dealer committed a bona fide error. But in a prompt action Securities & Exchange Board of India started preparing stronger guidelines to avoid such errors.
As per SEBI circularOrder-level checks5. Minimum pre-trade risk controls for all categories of orders placed on Stocks, Exchange Traded Funds (ETFs),
Index Futures and Stock futures shall be as follows:
5.1. Value/Quantity Limit per order:
(a) Any order with value exceeding Rs. 10 crore per order shall not be accepted by the stock exchange for execution in the normal market.
(b) In addition, stock exchange shall ensure that appropriate checks for value and / or quantity are implemented by the stock brokers based on the respective risk profile of their clients.
Cumulative limit on value of unexecuted orders of a stock broker:Stock exchanges have been directed to ensure that the trading algorithms of the stock brokers have a ‘client level cumulative open order value check’. In continuation to the above, stock exchange are directed to ensure that stock brokers put-in place a mechanism to limit the cumulative value of all unexecuted orders placed from their terminals to below a threshold limit set by the stock brokers. Stock exchanges shall ensure that such limits are effective.
Dynamic Price Bands (earlier called Dummy Filters or Operating Range)For scrips excluded from the requirement of price bands, stock exchanges have implemented a mechanism of dynamic price bands (commonly known as dummy filters or operating range) which prevents acceptance of orders for execution that are placed beyond the price limits set by the stock exchanges. Such dynamic price bands are relaxed by the stock exchanges as and when a market-wide trend is observed in either direction.
Further the market regulator has decided to tighten the initial price threshold of the dynamic price bands. Stock exchange shall set the dynamic price bands at 10% of the
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previous closing price for the following securities:
(a) Stocks on which derivatives products are available,
(b) Stocks included in indices on which derivatives products are available,
(c) Index futures,
(d) Stock futures.
Stock exchanges have also been asked to ensure that the stock brokers are mandatorily put in risk-reduction mode when 90% of the stock broker’s collateral available for adjustment against margins gets utilized on account of trades that fall under a margin system. Such risk reduction mode shall include the following:
(a) All unexecuted orders shall be cancelled once stock broker breaches 90% collateral utilization level.
(b) Only orders with Immediate or Cancel attribute shall be permitted in this mode.
(c) All new orders shall be checked for sufficiency of margins.
(d) Non-margined orders shall not be accepted from the stock broker in risk reduction mode.
(e) The stock broker shall be moved back to the normal risk management mode as and when
Sebi has further directed that stock exchange should stake necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant byelaws, rules and regulations, within one month from the issuance of the circular and with atleast one week advance notice to the market;
(b) Bring the provisions of this circular to the notice of the stock brokers and also disseminate the same on its website and also communicate to SEBI the status of implementation of the provisions of the circular.
It has been decided to tighten the initial price threshold of the dynamic price bands. Stock exchange shall set the dynamic price bands at 10 per cent of the previous closing price. As a result of the upper limit on single order, the regulator has made it impossible for anyone to avoid the block deal window and route trades through the normal window.
Later, to mitigate risks arising out of algorithmic trading and safe-guarding the markets from erroneous or manipulative trading activities, market regulator hiked the Base Minimum Capital (BMC) for stockbrokers to Rs 50 lakh from Rs 10
lakh earlier. (The BMC is the deposit given by the member of the exchange against which no exposure for trades is allowed.) The changes will be in place by March 31 next year. The last time the BMC requirement was hiked was in 1996. However, the BMC deposit requirement prescribed for the different profiles ranges from Rs 10 lakh to Rs 50 lakh for members of stock exchanges with nation-wide trading terminals. For members of other stock exchanges the requirement would be 40% of the same. The new rules will require brokers and trading members to deposit Rs 10 lakh if they opt for only proprietary trading without the algorithmic option, Rs 15 lakh for trading only on behalf of clients (without proprietary and algorithmic options). However, a deposit of Rs 25 lakh would be required for proprietary trading and trading on behalf of clients (without algorithmic trading) and Rs 50 lakh for trading with the algorithmic option. Further, the exchanges can seek for higher deposits if they perceive greater risks for any broker. A minimum 50% of the deposit would be required to be in the form of cash and cash equivalents.
The regulator has introduced minimum pre-trade risk controls for all categories of orders placed on stocks, Exchange Traded Funds (ETFs), Index Futures and Stock futures. While the limit on value of an order has been fixed at Rs 10 crore, the stock exchange will be required to ensure that appropriate checks for value and quantity are implemented by the stock brokers with respect to the risk profile of their clients. Sebi has, however, said that in case of a trend in either direction, the dynamic price bands shall be relaxed in increments of 5%.
Sebi has also directed the stock exchanges to ensure that stock brokers put-in place a mechanism to limit the cumulative value of all unexecuted orders placed from their terminals to below a threshold limit set by the stock brokers.
Though all the measures are being taken by the market regulator to check any similar flash crash in the markets in future but the market participants have a mixed response with some saying that this sort of limit has come for the first time. Stock exchanges have also been directed to ensure that the stock brokers are mandatorily put in risk-reduction mode when 90 per cent of the his collateral available for adjustment against margins gets utilised on account of trades that fall under a margin system. Apprehension are still high despite SEBI’s new guidelines and prospect of tighter controls, many are still worried over who is to blame and whether any mooted reforms would stop a repeat occurrence.
Flash Crash & SEBI’s Latest Initiatives
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Provisions & Amendments to GAAR
Provisions and amendments to GAARThe Revenue Department finally submitted amendments to GAAR, the controversial law against tax avoidance, to the Prime Minister’s Office (PMO). The government is working on the recommendations of Parthasarathy Shome Committee, which had suggested modification in laws dealing with General Anti-Avoidance Rules (GAAR) and retrospective tax law amendments. One of the key recommendations of the Shome Committee is to defer the implementation of GAAR by three years. This period could also seek to prevent further precipitation of mistrust between the tax payer and the tax collector.
GAAR, which was proposed in Budget 2012-13 to prevent tax evasion, evoked sharp reactions from foreign as well as domestic investors who feared that unbridled powers to taxmen would result in harassment of investors. A committee under the chairmanship of Director General of the income tax to give recommendation for formulating the guidelines for proper implementations of GAAR provisions under the direct tax code, 2010 and to suggest safeguard to these provision to curb the abuse (not payment of tax) was constituted by the chairman CBDT. The committee consisted of top six officials of tax departments. After several meetings broad based discussions with FII, advisory committee and other stakeholders it made the recommendations split into circulars and rules.
Proposals for inclusion in the guidelines A) The Committee made the following
recommendations to be incorporated in the Guidelines u/s101:
a) Monetary Threshold- The committee felt that in order to avoid the indiscriminate application of the GAAR provisions and to provide relief to small taxpayers, there should be monetary threshold for invoking the GAAR provisions and recommended that only an arrangement or arrangements where the tax benefit through the arrangement(s) in a year to an assess is above Rs. ___ lacs will be covered by GAAR provisions.
b) Prescription of statutory forms- The committee further felt that a consistency of approach is essential in the procedures for invoking the GAAR provisions and adequate safeguards should be provided to ensure that principles of natural justice were not violated and there is transparency in the procedures. Therefore it prescribed statutory forms For the Assessing Officer to make a reference to the Commissioner u/s 144BA (1), for the Commissioner to make a reference to the Approving Panel u/s 144BA (4) and for the
Commissioner to return the reference to the Assessing Officer u/s 144BA (5)
c) Prescribing the time limits-The committee was of opinion that there should be absolute certainty about the time limits during which the various actions under the GAAR provisions are to be completed. Some of these time lines have been prescribed under the act under sections 144BA (1) and 144BA (13). For the remaining actions the following time lines are suggested by the committee: It may be prescribed that 144BA (4) - the CIT should make a reference to the Approving Panel within 60 days of the receipt of the objection from the assessee and in case of the CIT accepting the assessee‟s objection and being satisfied that provision of chapter X-A are not applicable, the CIT shall communicate his decision to the AO within 60 days of the receipt of the assessee‟s objection as prescribed under section 144BA (4) r.w.s. 144BA(5).
No action u/s 144BA (4) or (5) shall be taken by the Commissioner after the period of six months from the end of the month in which the reference under sub-section 144BA (1) was received by the Commissioner.
B) Recommendations regarding setting up of the Approving Panel u/s 144(BA)
The committee after much discussion on Approving Panel recommended that there should be one Approving Panel, which shall be situated at Delhi. Subsequently, the CBDT should review the number of Approving Panels required on the basis of the workload in the FY 2014-15.
The Approving Panel should comprise of three members, out of which, two members should be of the level of Chief Commissioners of Income Tax and the third member should be an officer of the level of Joint Secretary or above from the Ministry of Law. All the members should be full time members.
The Approving Panel should be provided the secretariat staff along with appropriate budgetary and infrastructure support by the CBDT. The secretariat should be headed by an officer of the level of Joint/Additional Commissioner of Income Tax.
C) Recommendations for the Circular on GAAR
For the purpose of explaining the provisions of GAAR and better understanding the Committee suggested a detailed note to be included in the circular
1.0 According to the explanatory memorandum to the finance bill 2012, while introducing the provisions of
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Provisions & Amendments to GAAR
General Anti Avoidance Rule (GAAR) in the Income-tax Act the question of substance over form has consistently arisen in the implementation of taxation laws. There are some specific anti-avoidance provisions, but, prior to introduction of GAAR; general anti-avoidance has been dealt in specific cases only through judicial decisions. In an environment of moderate rates of tax, it is necessary that the correct tax base be subject to tax in the face of aggressive tax planning. Internationally, several countries have codified the “substance over form” doctrine in the form of General Anti Avoidance Rule (GAAR) and are administering statutory GAAR provisions.
1.1 The General Anti Avoidance Rule (GAAR) is a codification of the proposition that while interpreting the tax legislation, substance should be preferred over the legal form. Transactions have to be real and are not to be looked at in isolation. The fact that they are legal does not mean that they are acceptable with reference to the meaning in the fiscal statute. Where there is no business purpose, except to obtain a tax benefit, the GAAR provisions would not allow such a tax benefit to be availed through the tax statute. These propositions have otherwise been part of jurisprudence in direct tax laws as reflected in various judicial decisions. The GAAR provisions codify this „substance‟ over „form‟ rule.
2.0 Tax avoidance Vs Tax Evasion
Tax evasion is generally the result of illegality, suppression, misrepresentation and fraud. Tax avoidance is the result of actions taken by the assessee, none of which or no combination of which is illegal or forbidden by the law itself. The GAAR provisions do not deal with cases of tax evasion. Tax evasion is clearly distinct from tax avoidance and is already prohibited under the current provisions of the Income-tax Act.
3.0 Tax avoidance vs Tax mitigation
Tax mitigation is a situation where the taxpayer takes advantage of a fiscal incentive afforded to him by the tax legislation by actually submitting to the conditions and economic consequences that the particular tax legislation entails. An example of tax mitigation is the setting up of a business undertaking by a taxpayer in a specified area such as a Special Economic Zone (SEZ). In such a case the taxpayer is taking advantage of a fiscal incentive offered to him by submitting to the conditions and economic consequences of the SEZ provisions in the Income-tax Act e.g., setting up the
business only in the SEZ areas and export from the SEZ area. Tax mitigation, as distinct from tax avoidance, is allowed under the tax statute. The GAAR provisions also do not deal with case of tax mitigation.
Analysis of the GAAR provisions4.1 The provisions relating to GAAR allow the tax
authority to, not withstanding anything contained in the Act; declare an “arrangement” which the assessee has entered into, as an “impermissible avoidance arrangement”. Once an “arrangement“ has been declared as an “impermissible avoidance arrangement”, the consequence as regards the tax liability would also be determined.
4.2 The provisions give a wide definition of the term “arrangement”. An “arrangement” means any step in or a part or whole of any transaction, operation, scheme, agreement or understanding, whether enforceable or not. It also includes the alienation of any property in such a transaction etc. The onus of proving that there is an impermissible avoidance arrangement is on the Revenue.
“Tax benefit” has been defined to mean
• A reduction or avoidance or deferral of tax or other amount payable under the Act or as a result of a tax treaty
• An increase in a refund of tax or other amount that would be payable under the Act or as a result of tax treaty
• A reduction in total income including an increase in loss.
Special provisions for Foreign Institutional Investors (FII’s)Foreign Institutional Investors have expressed certain concerns regarding GAAR provisions. The committee met the representatives of Asia Securities Industry & Finance Markets Association and Capital Markets Tax Committee of Asia. After discussions, the representatives of these bodies gave following suggestions to resolve their apprehensions.
• To exempt Capital Market transactions entirely from the GAAR provisions
• A flat tax on FII’s gains without any distinction between various transactions could be considered.
• The tax authorities could attempt to clarify the details of each provision in the GAAR. For this, they gave comments on how the relevant provision may be clarified.
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Commodity Watch
Cotton production estimated to be around 355 lakh bales during 2012-13: CAICotton output is likely to be around 355 lakh bales in 2012-13, while the consumption is expected to be around 265 lakh bales, as per the estimates released by the Cotton Association of India (CAI). At the start of the season 2012-13, there were concerns that the area under cotton may be lower than in 2011-12, due to the late onset of monsoon and unfavourable distribution of subsequent rains in some cotton growing areas. The acreage witnessed a decline of 3%, yet the crop output, as per estimates, appears promising due to good rainfall in AP and Maharashtra in the later part of the monsoon.
From 158 lakh bales in 2001-02, Cotton production has almost doubled in the last decade. Productivity level has also seen a record improvement from 308 kgs/ha in 2001-02 to close to 500 kgs/ha in 2011-12. The total acreage has also registered remarkable increase from 87.3 lakh ha in 2001-02 to 121.78 lakh in 2011-12. As per the CAI, the growth in production of cotton in India during the last 10 years was due to the increase in both acreage and yield.
India raises market access issue for agri-products with ChinaIndia has constantly raised the issue of market access and removal of bottleneck for its domestic agricultural products with China. India-China bilateral trade stood at $75.5 billion, but the inflating trade deficit in Beijing’s favour, which amount to about $40 billion in 2011-12, has lifted up concerns among Indian authorities.
Although China has allowed imports of 9 fruits including mangoes and grapes and 8 vegetables, it has yet to grant imports for remaining 14 fruits and vegetables. China approved the import of Indian Basmati rice in April 2012. Further the issue of market access to Indian agricultural products has been taken up at various inter-governmental interactions at different levels.
Minister of State for Commerce and Industry D Purandeswari said the government is making all efforts for enhancing merchandise exports from India to bridge the trade deficit with China. During Apr-Sept period of the fiscal, India’s imports from China stood at $28 billion, while exports aggregated at $6.43 billion. The percentage share of exports to traditional market (the US and Europe) during 2009-10, 2010-11 and 2011-12 has been 32.4%, 29.9% and 30.2%, respectively.
Ace Commodity Exchange unveils special scheme to promote delivery in Cotton contractAce Derivatives and Commodity Exchange (Ace) has unveiled a scheme whereby it will be offering a special concession in order to encourage hedgers’ participation and promote delivery in its Cotton contract, which it had launched on September 24, 2012. The concessions will be applicable for all goods deposited in the exchange accredited warehouses from December 21, 2012 and remain in force till further notification.
This scheme can be availed by the initial depositors who deposit the goods in the Exchange accredited warehouse and deliver the same on the Exchange platform. For these depositors, Ace will waive off - the testing and assaying charges, labour charges for loading and unloading of goods (Loading at depositors’ location and unloading at Exchange accredited warehouse) subject to maximum of Rs 4,000 per lot of 100 bales and the rent of warehouse for first month of deposit.
Indian wheat exports to touch 6 million tonnes in 2012-13 (MY): USDAIndia’s wheat export is likely to touch 6 million tonnes in the 2012-13 marketing year (MY) - 3 million tonnes each of government and open-market wheat, on the back of firm global prices, as per the United States Department of Agriculture (USDA) report. With the current tight open market supplies of wheat, private wheat exports are expected to decline drastically in the near future.
With expected firm international wheat prices, export prospects are also looking favourable through the first quarter of calendar year 2013, the government most likely will further augment the government-held wheat export quota, it added. The government wheat is currently fetching good export rates compared to the PDS wheat price of Rs 2,000-6,100 ($36-110) per tonne, MSP for MY 2012-13 of Rs 12,850 ($234) per tonne and open market sale price for bulk consumers in most states. The government’s decision to export 2 million tonnes of wheat from central stocks fetched a rate in the range of $296.70-319.50 per tonne.
Earlier this year, the government had allowed export of 2 million tonnes of the grain from central pool stocks of Food Corporation of India (FCI) through central public sector undertakings (CPSUs) like STC, MMTC and PEC.
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The Commerce Secretary S R Rao had said that the Food Ministry will move a proposal for allowing export of an additional 2.5 million tonnes of wheat from the central stocks in order to ease the storage crunch being faced by the country due to an all time high production. India produced a record high of 93.90 million tonnes of wheat crop in the 2011-12 crop year (July-June).
The government has a wheat stock of 37.65 million tonnes as of December 1, 2012, which is more than double the stipulated buffer and strategic stock requirement of 11.2 million tonnes as of January 1, 2013. United Nation’s body, Food and Agriculture Organisation (FAO) has estimated India’s wheat exports to touch 5 million tonnes in the 2012-13 MY.
Assam tea industry to increase export to ASEAN countriesWith the availability of existing untapped markets in ASEAN countries, the Assam’s tea industry will be focusing on increasing its exports over there with the ASEAN-India Trade Conclave to be a stepping stone for exploring those new markets. The ASEAN countries are tea-drinking nations but barring a few the others do not produce the beverage giving an opportunity of exporting Assam tea to these countries.
The Joint Forum of Assam Tea Planters’ Association, North Eastern Tea Association and Bharatiya Cha Parishad showcased different varieties of Assam tea at the stall set up by the Assam Directorate of Tea at the ASEAN-India Trade Conclave which was scheduled on December 17, 2012. The country’s total tea production stood at 988 million kg in 2011 out of which Assam produced 508 million kg.
Among the ASEAN countries - Vietnam and Indonesia are leading tea producers with Malaysia and Myanmar also contributing in a small way. However between 2009 and 2011, their contribution has decreased from 8.43% to 7.43% in the global tea production space. On the other hand on the consumption side, Malaysia was the leading consumer followed by Philippines. Vietnam and Indonesia are the only exporting countries of ASEAN group, but their export shares during 2009 - 2011 too, have decreased from 13.23% to 12.49%.
Tea exports drop by 20% in Apr-Sept’12Tea exports have declined by 20.24% to 81.85 million kg (mkg) in the first half of the current fiscal compared with last year due to drop in outbound shipments of the brew
from North and South India. The country shipped 102.62 million kg of tea in the Apr-Sept period of the 2011-12 fiscal. During April and September, the asking price in the export market rose to Rs.184.18/kg from Rs.152.04/kg in the same period of last year. The exports slumped by 20.77 mkg or 20.24% in last 6 months. Due to lower shipment, the overall earnings from exports dropped to Rs 1,507.62 crore from Rs 1,560.23 crore.
Tea exports registered a decline in the first and second quarters in the current financial year, as compared to the previous financial year. Tea shipments in April-June this fiscal declined by 22% to 30.70 mkg from 39.57 mkg in the same quarter of last fiscal, whereas, the exports of the brew fell by 19% to 51.15 mkg in July-Sept quarter of 2012-13 from 63.05 mkg in the year-ago period.
The prices rose to an average of Rs 116.54 from Rs 98.09. This reduced the off-take to 34.21 mkg from 49.41 mkg. As a result, the overall earnings dropped to Rs 398.69 crore from Rs 484.68 crore. India, the world’s second-largest producer and the biggest consumer of tea , exports the brew to Middle Eastern countries, the US and the EU.
DAC continues VIUC scheme to improve Vegetable ProductionThe Department of Agriculture & Cooperation (DAC) has continued the scheme on Vegetable Initiative for Urban Cluster (VIUC) for 2012-13 with an outlay of Rs 300.00 crore. The scheme was launched during 2011-12 with the support of Rashtriya Krishi Vikas Yojana (RKVY) and with an outlay of Rs 300.00 crore.
Starting from planting material to marketing it to retail level the scheme covers all aspects relating to formation of farmers’ association/groups, training/capacity building of farmers, linking farmers group with aggregators/markets, vegetable production and supply to urban centers.
Further, DAC is providing assistance to the farmers under National Horticulture Mission and Horticulture Mission for North-East and Himalayan States (HMNEH) in order to enhance the production and productivity of horticulture crops including tomato. The infrastructure facilities created under the Mission have helped in production and supply of quality planting material and also in improving the production and productivity of horticulture crops.
Global coffee exports up 17 per cent in October: ICOWorld coffee exports rose by a little over 17 per cent to
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88.76 lakh bags in the first month of the current coffee year that started from October, due to a significant spurt in shipments from Vietnam and Indonesia. Global coffee exports stood at 75.70 lakh bags in October 2011. The coffee year runs from October to September. One bag contains 60 kg of beans. Vietnam witnessed a two-fold increase in exports at 19.5 lakh bags during October 2012 from 9.75 lakh bags in the same period last year, while Indonesia’s coffee exports rose to 8.40 lakh bags from 4.94 lakh bags in the review period. Similarly, exports from rose to 2.45 lakh bags from 1.84 lakh bags. A similar trend was seen in Mexico, which exported 2.32 lakh bags of coffee in October 2012, against 1.77 lakh bags in the year-ago period.
Brazil, the world’s largest coffee exporter, shipped only 28.74 lakh bags during October this year as compared with 31.75 lakh bags in the year-ago period. While shipments from Colombia fell to 5.82 lakh bags from 6.02 lakh bags, exports from India declined marginally to 3.16 lakh bags from 3.17 lakh bags in the review period.
SEA urges govt to impose import duty on CPO, RBD palmoleinA move which will help farmers who are experiencing sharp fall in prices of fresh palm fruit bunches and soyabean, the Solvent Extractors Association of India (SEA) has urged the government to impose 10% import duty on crude palm oil and 20% on RBD palmolein. Besides protecting the interest of soyabean and mustard seed growers, the government can also create revenue of Rs 4,000-5,000 crore.
Most of the RBD palmolein is consumed by hotels, canteens, restaurants and the food industries and a small quantity of palmolein is consumed by lower income group, they are protected by subsidy of Rs 15/kg. The decrease in crude palm oil (CPO) and RBD palmolein prices in the international market has mainly affected soyabean price in the domestic market. Soyabean prices have dropped to Rs 3,200 a quintal from Rs 4,800 in July when farmers had undertaken sowing operations. The decrease in prices will also have an impact on current Rabi sowing of rapeseed/mustard.
Malaysia and Indonesia have huge palm oil stock of over 5 million tonnes, to reduce their excess stock; these palm oil producing countries are pushing their exports into India. The average CIF (cost, insurance and freight) price of CPO has plunged to $770 a tonne from $1,184 in April previous
year. RBD palmolein has dropped to $840 a tonne from $1,205 in April. In last 6 months, RBD palmolein and CPO prices have declined by 33% to over $400. In India, RBD palmolein prices have reduced to Rs 51,800 a tonne from Rs 62,131 in July.
SEA has expressed its concerns that the government should consider de-freezing the tariff value on RBD palm oil and other oils to align with current market price as being done for RBD palmolein on fortnightly basis to check the undue advantage. India, the world’s largest edible oil importer, has zero import tariff on crude oil and 7.5% on refined oil.
Govt to focus on wheat export, build a global brand for Indian wheatIndia’s wheat export has picked up pace in the last few months and also fetching good returns in the international market. The government is hopeful of ending FY13 with 20 million tonnes in stocks, same as the last year, despite a 9.8 million tonnes rise in procurement. This has removed the fears of huge losses that would have occurred as over 6 million tonnes of surplus wheat, which is stored in unscientific places from June. Further, the government is also focusing on to build the international brand of Indian wheat in the global markets by continuously exporting it.
Wheat prices in the world markets started firming up from August onwards because of drought in the United States, the world’s largest exporter and also low production in Australia, Ukraine, Russia and Argentina. On the back of strong response garnered by Indian wheat in global markets, the government is focusing on the idea of regularly exporting wheat from the central pool to build the Indian wheat as a brand in the global market. Off the 22 tenders floated by India to export 2 million tonnes of wheat from central pool since August, all of them, barring one fetched a price of over $300 per tonnes - the highest price of $324 per tonne.
The average price fetched by the wheat exported by government has been around $313 per tonne as against a base price of $228 per tonne. India has managed to export almost all the wheat from the central pool at a price which is more than $300 per tonne. This clearly shows that Indian wheat is slowly commanding a premium in the international markets because of low global wheat production. High international prices for wheat export will enable the government to decrease export subsidy on wheat to less than Rs 500 crore in 2012-13.
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Life Insurance
HDFC SL New Money Back Plan With HDFC SL New Money Back Plan, one gets regular cash back at periodic intervals, so that he can fulfill his dreams & aspirations. It gives a feeling of self reliant comfort to be assured that one has the necessary funds to live a fulfilling life. This plan also offers the financial protection to the loved ones when they need it the most, enabling one to live life with peace of mind. HDFC SL New Money Back Plan is a typical traditional plan with reversionary and terminal bonuses integrated within it.
HDFC SL New Money Back Plan is a ‘with profits’ plan that offers -
• A proportion of sum assured as cash payout at regular 4 intervals during the policy term.
• A lump sum payment on survival upto maturity date.
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Eligibility of HDFC SL New Money Back Plan
• Minimum Entry Age: 14 Years
• Maximum Entry Age: 53 Years
• Maximum Maturity Age: 65 Years
• Policy Term: 12, 16, 20 and 24Years
• Minimum Premium: Rs 10,000 per annum
AdvantagesMoney Back on completion of every 4 years, you would get a percentage of your sum assured as cash payout. The payout will be as defined below.
Policy Terms (Yrs.)
Survival Benefit as a % of Sum Assured (Money Back Payout)
4th yr
8th yr
12th yr 16th yr 20th yr 24th yr
12 25% 25% 50% + attaching
bonus
- - -
16 25% 25% 25% 25% + attaching
bonus
- -
20 20% 20% 20% 20% 20% + attaching
bonus
-
24 15% 15% 15% 15% 15% 25% + attaching
bonus
Provides valuable protection to your family by way of lump sum payment i.e. Sum Assured plus attaching bonuses, in case of unfortunate demise within policy term, over and above any earlier payouts.
You can choose to pay your premium as either Annually,
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Tax benefits under sections 80C and 10(10D) of Income Tax Act, 1961 are available
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Money Back:A specified % of Sum Assured will be made every 4 years.
Maturity Benefit:On maturity, life cover deducted by survival benefits and bonuses will be paid.
Bonuses: The Reversionary bonus as a percentage of the sum assured would be declared at the end of the financial year Once added to the policy, the bonus is guaranteed to be payable on the earlier death or on maturity. The Reversionary bonus will depend on the actual experience with respect to the investment return, expenses, mortality, tax etc and would be declared keeping in mind a long term view of the future experience.
The Terminal bonus is sometime added on maturity and enables the company to pay a fair share of the surplus at the end, based on the actual experience over the policy term and allowing for the reversionary bonuses already attached. As the terminal bonus depends on the actual future experience it is not a guaranteed benefit.
Indicative annual premium that a healthy male would pay for a sum assured of Rs 2 lakh. The premium is required to be paid for the full policy term
