The Week That Was: Fedspeak, Weak Rupee, Truant Weather Rock Nation

Its been a week of high drama. A natural catastrophe led to the death of thousands in Uttarkhand , while a bloodbath was seen in the Indian and US markets on the back of Fed chairman Ben Bernanke tapering quantitative easing. Adding to investor woes, the rupee was hammered as FIIs withdrew from the debt market. And in politics, the Cabinet was again reshuffled.

Here's a lowdown of the micro, macro and everything else that made headlines this week.

Welcome To The Week that was

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Unlikely to be at SBI's next annual general meet: Chaudhuri

Jun 21, 2013, 10.33 PM IST

State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

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Unlikely to be at SBI's next annual general meet: Chaudhuri

State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

Like this story, share it with millions of investors on M3

Unlikely to be at SBI's next annual general meet: Chaudhuri

State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

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State Bank of India has written to aviation regulator DGCA expressing concern over the grounded Paramount Airways plans to re-launch the carrier, saying it has been in default for long.

Also read: SBI objects to Paramount's revival plan over dues

Meanwhile responding to a question at the SBI AGM today, State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

However, in May end there were rumors that Pratip Chaudhuri may get an extension as SBI Chairman.

From DJ EU Officials Spain Aid Cap Of 100 Bn Euros 'should Be Enough'

The latest earning numbers FIRST on CNBC-TV18

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Data market war: Idea slashes tariff by 90% in 8 circles

Triggering a tariff war, Idea Cellular on Thursday slashed data charges by 90 percent in eight circles, following Bharti Airtel and Vodafone, who recently cut their rates by similar margins in select circles.

" Idea Cellular ...has revised data tariff in eight circles across the country...users can now access data for 2 paise/10 KB, which is a 90 per cent reduction in the existing tariff of 2 paise/KB," Idea Cellular said in a statement.

Also read: Airtel slashes data usage rates by 90% in Punjab, Haryana

Bharti Airtel had yesterday slashed data usage charges by 90 percent for pre-paid subscribers in Punjab and Haryana, a day after Vodafone lowered its data charges by 80 per cent for pre-paid and post-paid customers in three circles.

Airtel has reduced the price to 1 paisa per 10 KB from 10 paisa per 10 KB and Vodafone slashed the tariff from 10 paisa per 10 KB to 2 paisa per 10 KB.

Idea's new tariff is applicable to all 2G data users who use data on pay-as-you-go basis and also on an average on regular data from July 1, 2013 and the offer will be valid for 90 days, the statement added.

 "The new data rate will be automatically implemented for all Idea 2G postpaid subscribers in these markets, effective July 1...prepaid users can avail the new rate with a value recharge priced between Rs 5-10," the statement said.

 Idea said Tamil Nadu & Chennai, Karnataka, Kolkata, West Bengal, Assam, North East, Bihar, and Orissa circles will benefit from the revised data tariff.

"These eight circles comprise one-third of the total mobile users in India, with a large number of users waiting to board the mobile broadband wagon. Availability of data at such affordable rates will usher in a new wave of mobile data growth in the country," Idea Cellular deputy managing director Ambrish Jain said.

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Affordable housing: Mphasis founder Jerry Rao's next foray

From software in the 1990's to affordable housing in 2010, Jerry Rao has always aimed at riding the next big wave.

The former Mphasis founder speaks to CNBC-TV18's Vineetha Athrey exclusively about his new venture; Value and Budget Housing Corporation (VBHC) and how it is attracting big ticket investors like the World Bank.

Also read: RBI policy big letdown for realty sector: MCHI-CREDAI

Betting on affordable housing

Affordable housing is still to pick up in India but that has not stopped Jerry Rao's venture Value & Budget Housing Corporation (VBHC) from attracting investors.

According to Rao, the World Bank-backed International Finance Corporation (IFC) is coming on board and will invest Rs 60 crore as equity which translates to a 12 percent stake.

With HDFC , Caspian and Carlyle having invested Rs 120 crore for a 36 percent stake in the company, the corporation already has big name on its board. At their end, the promoters hold around 36 percent.

"The purpose is to strengthen capital base of the parent company and use it for individual project jd or purchase of land", says Jerry Rao, chairman, VBHC.

With annual revenues of a Rs 100 crore, VBHC offers homes in the Rs 15-25 lakh range and has six ongoing projects across Bangalore, Mumbai, Chennai and Delhi.

VBHC's plans

The company is looking to launch six to eight new projects this fiscal. It is also eyeing new markets such as Gujarat, Greater Mumbai and Rajasthan.

In addition to IFC, it is in talks with other financial institutions to raise Rs 30-40crore at the special purpose vehicle (SPV) levels for these projects.

"We raise anywhere between 20 and 70 percent of the equity component of the project. There are institutions, funds and wealthy individuals who are willing to invest with us", says Rao.

Affordable homes, a good bet?

But the way forward may not be all-smooth. The fact is, affordable housing has not really taken off in India on a very strong note

Surging raw material costs, especially those of cement and steel, might throw more spanners in Rao's wheel. To counter this, Rao admits he has no choice but to raise prices by three to five percent across the board on a quarterly basis; a move that might not go down very well with its price sensitive clientele.

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Tourism Fin Corp to seek licence from RBI to set up bank

The Tourism Finance Corporation of India Ltd (TFCI) on Wednesday said the board has approved a proposal to seek licence from the RBI for setting up a bank. "TFCI, in terms of the approval by the board of  directors, is submitting application with RBI for a banking licence," the company said in a filing on the BSE.

Also Read: RBI to come out with paper on banking structure: D Subbarao

The Industrial Finance Corporation of India Ltd (IFCI) is the majority owner of the TFCI with 42.50 percent stake, while State Bank of India , LIC and Bank of India has 9.19 per cent, 7.70 percent and 4.70 percent respectively.

The TFCI functions as a specialised all-India development financial institution to cater to the financial needs of tourism industry. Shares of the company closed at Rs 22.25 per unit, down by 1.1 percent on the BSE.

Earlier this month, RBI while issuing clarification on new bank licence guidelines said, the entities getting licences to open new banks will be given 18 months to open branches against 12 months prescribed earlier, and promoters would have to transfer their holdings to the non-operative financial holding company (NOFHC) in a stipulated period.

The NOFHC envisages holding of the bank and other regulated financial services entities of the promoters under the NOFHC and prudential exposure norms for the regulated entities. India has 26 public sector banks, 22 private sector banks and 56 regional rural banks.

Ten banks were licenced on the basis of guidelines issued in January 1993. The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks, and fresh applications were invited. Of the 10 licences issued in 1993, four banks merged with other lenders over a period of time. Times Bank merged with HDFC Bank , while Global Trust Bank was amalgamated with the state-owned Oriental Bank of Commerce .

Centurion Bank took over Bank of Punjab to become Centurion Bank of Punjab, which merged with HDFC Bank in 2008.

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EU-US FTA will promote growth around world: Joao Cravinho

The two biggest players in the global economy, that is the European Union (EU) and the United States (US) are about to launch negotiations on a free trade agreement (FTA). According to Joao Cravinho, ambassador of the European Union in India, EU-US FTA will promote growth around the world.

He believes that this trade agreement can add as much as USD 100 billion to world gross domestic product (GDP), excluding what it will add to the US and the EU side. He told CNBC-TV18 that the talks could last for two years.

Talking about the long-running negotiations between India and the European Union on a FTA, he said it is nearing completion.

Also read: India-EU FTA in jeopardy? Here's why

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Can you give us a sense of the proposed timeline for this US-EU free trade agreement (FTA)?

A: We are ready to start talks as of now. We are waiting for the United States approval to come from the US Congress. Hopefully that will come in the manner that will allow us to start negotiations before the summer.

So, in the very near future we will be beginning a negotiation process. We think it could last for around two years and that could have a major impact on world trade. A major impact ofcourse for the European Union (EU) and for the United States (US), but more widely on world trade flows as well.

Q: Both the US and the EU have been facing serious economic challenges. Is the US-EU FTA being seen in a sense as a panacea for its economic woes?

A: Certainly boosting trade is good for the economy. Whether the economy is growing well or whether the economy is having a difficult time. As you rightly point out matters have not been easy on either side of the Atlantic and we expect that this is part of the solution. It will promote growth on both sides of the Atlantic.

One important thing though, it will promote growth around the world because world trade or the world economy is now so integrated. So many goods imply an integrated global value chain that the knock-on effect for other countries can also be quite significant. We expect that this trade agreement can add as much as USD 100 billion to world gross domestic product (GDP) excluding what it will add to the US and the EU side. So, it will be good for the world as well.

Q: US and the EU are the biggest players in the global market and the global economy. Won't this FTA impact trade with its partners like India? There are concerns on trade diversion for instance.

A: I don't think so. You are quite right, we are talking about the two biggest players in the world. EU is slightly bigger than the US economy. Together they are almost 50 percent of global GDP. So, this will have a major knock-on effect around the world.

However if EU and US increase the trade between them, they are also going to increase demand for raw materials. They are going to increase the need to source products all around the world or source raw materials around the world. This is why we believe that this kind of agreement will not be trade diversionary on the contrary it will be a stimulus to international trade and the available studies that have been made indicate this quite substantially.

Q: The EU will also have to deploy a majority of its resources in terms of negotiators for the US and Japan FTAs, will that not impact the India-EU FTA talks which have already been going back and forth, seen years of delays?

A: I think that the pace of talks is dictated by other factors. We are now very close to finalizing the talks. We haven't reached that moment yet but we are very close. We believe that we have a very fortunate time horizon ahead of us because the trade talks with the US, which we believe can be launched now will really intensify the end of the year 2014 will be a very intense year.

We hope that we can finish the talks with India before that happens sometime in the next two or three months. So, in terms of our calendar we believe that we have got things just right and we are looking forward to an enormous amount of hard work.

Q: For months now we have been hearing about how both sides are close to finalizing the agreement. In the light of the fact that negotiations with the US and Japan are going to start, are you really still hopeful about the India-EU FTA going through?

A: There is more than hope, there is optimism. Both sides understand that in this process of evolving world trade patterns it is fundamental that EU and India story be central part of the global story. That means finalizing this deal now. In any negotiation it is in the last moments that we find the most difficult and intractable problems.

However looking at the big picture, I think that both sides realize that they have much more to gain than to lose. Those difficult decisions which have to be taken at the end of negotiations are now very close to being taken.

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CIE Automotive make Rs 207 cr open offers for 2 MM firms

Spanish group CIE Automotive's entities have made open offers worth over Rs 207 crore to the shareholders of Mahindra Forgings and Mahindra Composites , as part of its deal with conglomerate Mahindra & Mahindra  (M&M).

Also read: Deal with CIE a marriage made in heaven, says M&M's Luthra
    
The open offers for acquiring 26 percent stake each in Mahindra Forgings and Mahindra Composites have been made by Participaciones Internacionales Autometal Dos, S.L. along with Autometal S.A. and CIE Automotive S.A.
    
The three entities have made an open offer worth over Rs 198 crore to acquire about 2.45 crore shares in Mahindra Forgings. These scrips are proposed to be purchased at a price of Rs 81 apiece, according to a public announcement.
    
In another announcement, these entities have offered to buy about 11.65 lakh shares in Mahindra Composites for around Rs 8.7 crore. The offer price is Rs 74.70 per scrip.
    
M&M would be selling its stake in Mahindra Forgings.
    
In the case of Mahindra Composites, M&M as well as Mahindra Holding would be offloading shares.     

Under a multi-layered deal, M&M on June 15 had announced that it would acquire 13.5 percent stake in CIE Automotive for 96.24 million euros.
    
In turn, M&M would offload stakes in its three group firms to Participaciones Internacionales Autometal Dos, SL, CIE Automotive SA and Autometal, SA.

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Unilever open offer price for HUL 'fair, reasonable': Panel

FMCG major Hindustan Unilever today said the committee of independent directors that looked into parent firm Unilever's proposed USD 5.4 billion open offer, is of the view that the offer price of Rs 600 per share is "fair and reasonable".
    
"After a review of the public announcement, detailed public statement, the draft letter of offer, and the aforesaid points, the independent directors committee (IDC) is of the opinion that the offer price of Rs 600 per equity share is fair and reasonable," Hindustan Unilever Ltd (HUL) said in a filing with BSE.

Also read: Unilever to begin raising stake in HUL from June 21
    
Last month, the company had constituted a committee of independent directors, including five independent directors of the company--Aditya Narayan, S Ramadorai, R A Mashelkar, O P Bhatt and Sanjiv Misra, to give recommendation on the open offer to the shareholders.
    
The offer price is at a 29 percent premium to the volume weighted average market price of the equity shares for a period of 60 trading days, the committee said in its recommendations.     

"The offer price is at a premium to the highest ever market price of the equity shares of face value of Rs 1 each, up to the date of public announcement of the open offer," it added.
    
The USD 5.4 billion-open offer by Unilever Plc to buy 22.52 percent stake in HUL would begin on June 21 and close on July 4.

Once complete, the open offer would be one of the biggest deals and fifth largest India inbound M&A transaction on record till date.

Anglo-Dutch consumer goods giant Unilever Plc is looking to hike stake in its Indian arm HUL to 75 percent through the open offer. Currently, it has a stake of 52.48 percent.     

Unilever will pay Rs 600 a share, valuing the open offer at USD 5.4 billion.
   
HUL's portfolio includes leading brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Sunsilk, Pepsodent, Closeup Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall's and Pureit.
    
The company, which employs over 16,000 employees, posted net sales of Rs 26,317.15 crore for the 2012-13 fiscal.     

Shares of HUL today closed at Rs 595.60 on the BSE, up 0.02 percent from its previous close.

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Export parity price will lead refineries into red: Moily

Admonishing the export parity pricing model for fuel products, Oil Minister, Veerappa Moily told CNBC-TV18 that if adopted this pricing model would lead all refineries in to red and no new refineries would come up.

It must be noted that just a month back Finance Minister P Chidambaram had strongly stated that oil marketing companies will get only Rs 20,000 crore from the government and Rs 60,000 crore from upsteam companies. However sudden depreciation in rupee is likely to severely impact OMCs under recovery.

Moily stressed that he had raised concerns relating to export parity pricing to the Prime Minister Manmohan Singh. " Prime minister having intervened and Kirit Parikh committee being constituted, the recommendation of the Kirit Parikh committee will have weightage," Moily said. However he added that if Kirit Parikh Committee also recommends going for export parity pricing then refineries will be the biggest losers. 

Kirit Parikh Committee report is expected in two-three month. Moily argued that export parity pricing is not suitable for India as the country meets 80 percent of its fuel requirement through import.

"If you want to make it only 100 percent export then the companies will go red, almost all the refineries will go red, and no new refinery will come up," Moily said.

Below is the verbatim transcript of Moily's interview

Q: Let me start by asking you about the impact of the depreciating rupee and as far as global crude prices are concerned, there was relief on that front because global crude prices have been coming off and have been stable between USD 102-104 per barrel but the depreciating rupee has offset all the relief that you enjoyed on account of the fall in global commodity prices. We have been speaking with oil marketing companies (OMCs) and they are clearly worried at this point in time about the impact, what is your own assessment of the rupee's impact as far as the under-recovery is concerned?

A: It is a matter of great worry and the worst hit are oil companies. We have to stabilise this because now by every rupee depreciated, all companies put together we lose about Rs 9,000 crore. It is a disaster. We need to address it. Hopefully I think within two-three days time, rupee will stabilise.

Q: Have you had any conversations with the finance ministry on the possible options because you are clearly one of the most impacted parties, has there been any conversation with the finance ministry on what the repercussions of depreciating rupee could be, how oil marketing companies could be spared?

A: Yes we are in constant dialogue with them. That is why I am now reassured that within two-three days time, rupee will stabalise.
 
Q: What is the basis of that reassurance?

A: I think the Reserve Bank of India (RBI) can do some mid-course corrections, and the number of measures government has taken particularly on attracting foreign institutional investors (FIIs) and also the foreign direct investment (FDI) would also help. The investors' confidence will rise. Once the investors' confidence rises then possibly the rupee will stabilise.

Q: You are saying that you have been given an assurance by the finance ministry that steps will be unveiled within the next week or so that will perhaps boost foreign investor interest into the country and hence stabilise the rupee so you have been given that assurance because that is the sense that we are getting as well?

A: Ultimately, the fundamental of the economy of this country is still strong. To be very frank, this is only an aberration which can take place from time to time. For which at sometime we must have a structural change with regards to certain financial policy, but at the same time, nothing can substitute particularly for attraction of the FIIs and FDIs and also inspiring the confidence among the investors.

Q: While what the government finally does in terms of FDI cap for bringing in more FII money into the market is a separate story but if we see the volatility in the rupee continue, what is the likely impact as far as the subsidy is concerned. Rs 80,000 crore is what was earlier estimated, oil market companies saying already that the subsidy has gone beyond Rs 1,00,000 crore, if this trajectory for the rupee continues, how bad is it likely to be?

A: The under-recovery will increase. Again we have the problem, the finance ministry wants export parity price and we want trade parity price, which was in practice. Last year's under-recovery has been reimbursed by the finance ministry.

Q: Export parity price?

A: No, I am not agreed on that.

Q: Finance ministry believes that a decision has been taken as far as export parity is concerned?

A: Now fortunately, the prime minister intervened. In the presence of the finance minister, I presented, by that time I had already appointed Kirit Parikh Committee then I told the finance minister that you go through the reference which we have made and you can have your representatives in the Kirit Parikh Committee. Now the proposal has come from them. They want that export parity matter should also be included in their terms of reference. So Kirit Parikh Committee will look into it. Yesterday we constituted the committee and revised the terms of reference and maybe that of course we want the report to come within two months, possibly two-three months time, the report will come thereafter we will go in for that. That will address the under-recovery question.

Q: Let me talk about the under-recoveries and Kirit Parikh report is still as you yourself pointed out two-three months away, the finance minister has made it very clear, he has categorically stated, I am not going to give oil marketing companies anything more than Rs 20,000 crore, Rs 60,000 crore will come from upstream companies, I will only give Rs 20,000 crore. If your under-recoveries continue to move in the trajectory with the depreciating rupee, are you going to be able to convince the finance minister?

A: I think you are only reiterating the statement which is made by the finance minister before prime minister intervened in the matter. Prime minister having intervened and Kirit Parikh committee being constituted, the recommendation of the Kirit Parikh committee will have weightage. Whatever Kirit Parikh committee recommends I am prepared to go for it.

Q: Hypothetically, if he three months down the line says export parity is the way ahead, will the oil ministry agree?

A: You must know the history of this parity prices. Rangarajan Committee, Kirit Parikh Committee, all these committees had recommended trade parity. Because, what is our export. 80 percent we are importing, not exporting. When we were importing, the formula was 80 percent import price and 20 percent export price that is how the combinations were done. If you want to make it only 100 percent export then the companies will go red, almost all the refineries will go red, and no new refinery will come up.

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India set to become a hub for Ford, says its CEO

With India leading the small SUV market and attracting majority of investments from Ford Motor Company, the country is set to become a hub for the US automobile major, a top official said today.
    
"Yes. Absolutely. That is our dream. India is great market and an indicator of about what people really want in vehicles around the world. The (latest SUV from Ford) Ecosport is a really good example", Ford Motor Company President and Chief Executive Officer, Alan Mulally told reporters here.

Also read: Ford India sales down 22.46% in May

Observing that India is one of the important markets for Ford globally, he said, "small SUV segment on the B size platform is the fastest growing segments which is led by India. We are making Ecosport in five locations around the world. And it is going to be most popular vehicle worldwide. So it (The launch) is very important launch for us".
    
He said Ford is making long-term commitments on strategies in rolling out products and currently is on a "positive path" on its growth.
    
"We are number one brand in United States and number two in all Americas. In Europe we are the fastest growing brand. We have made tremendous commitment in terms of man and money investments", he said.
    
Asked about the company's focus on its Asia-Pacific operations, Mulally said the management has not made any specific time frame on reaping profits, but expects a
significant revenue to be contributed from this region.
    
"Clearly, in the next few years,it (Asia Pacific region) is going to be a major contributor to Ford. I think in four-five years, 40 percent of revenue will come from Asia Pacific. This is the largest growing region in the world", he said.
   
Currently, Ford has garnered about three per cent market share in the Asia Pacific region.

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