Capital raising made easier: RBI tweaks Basel III bonds

The central bank has halved the maturity of these bonds to 5 years from 10 years earlier.

Raising capital has just got easier for banks with RBI tweaking the bonds issued under the Basel III guidelines. As part of these changes, the central bank has halved the maturity of these bonds to 5 years from 10 years earlier.

It has also allowed banks to either convert these bonds into shares or repay a part of the principal amount if the bank makes losses and thereby its core equity capital falls below the mandated 6.125 percent. The remaining principal amount can be repaid in future once banks have enough capital.

More importantly, bankers say these bonds can now be issued to retail investors as well.

NS Venkatesh, Executive Director, IDBI Bank , said: "The revised guidelines put out by RBI is most welcome. Because what they have done is fine tune the regulations. So that it is more or less now converging to an international standards prescribed for the bond issue and present in the international market. I think definitely the issuer should be able to save at least around 50 to 75 bps on the cost of issuance."

Credit rating agencies, on the other hand, say the changes in Basel norms will reduce the risk in these bonds and improve its rating, although these bonds will continue to be a notch down from corporate credit rating. But rating agencies say the demand for these bonds will increase

Pawan Agrawal, Senior Director, CRISIL Ratings, said: "More banks are likely to issue these bonds and our expectation is that there is an appetite or requirement for 1.3 lakh crore over implementation period of Basel guidelines till March 2019. That requirement will continue to be offset if these instruments are not raised. It will have to met by equity, which is clearly a costlier option."

Bank of India had raised the first set of Basel III bonds in July this year. Now other banks like IDBI Bank are looking to raise similar bonds. Analysts say this will bring down the quantum of capital that banks have to raise through equity as debt will now provide a fill up to meet banks' capital requirements.

IDBI Bank stock price

On September 04, 2014, IDBI Bank closed at Rs 75.20, down Rs 1.85, or 2.4 percent. The 52-week high of the share was Rs 116.50 and the 52-week low was Rs 52.30.

The company's trailing 12-month (TTM) EPS was at Rs 5.73 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 13.12. The latest book value of the company is Rs 147.38 per share. At current value, the price-to-book value of the company is 0.51.

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Tata Comm CFO Sanjay Baweja to resign

In order to facilitate an orderly transition, Baweja will continue serving as the CFO until November 3, 2014.

Global Internet solutions provider  Tata Communications today said its Chief Financial Officer (CFO) Sanjay Baweja will be leaving the organisation to pursue other opportunities.

The firm said it is looking for a replacement to Baweja. In a BSE filing, Tata Communications said: "Sanjay Baweja, CFO, will be leaving the organisation to pursue other opportunities. Tata Communications is currently seeking chief financial officer candidates and intends to complete its search in the near future."

In order to facilitate an orderly transition, Baweja will continue serving as the CFO until November 3, 2014, it added. As CFO, Baweja was responsible for strategic financial management including financial reporting and compliance, treasury and fund management, financial planning and analysis, management assurance, taxation and procurement etc.

Prior to Tata Communications, he served in Emaar MGF Land Limited as Executive President for Corporate Affairs and Chief Risk Officer. He has also worked in several roles across companies like Bharti Airtel , Xerox Modicorp, Digital Equipment and Ballarpur Industries.

"Baweja's exit from the business is on positive terms. The company appreciates the tremendous work ethic and professionalism exhibited by him over the last five years and wishes him nothing but success in his future endeavours," the firm said in the filing.

The USD 3.2 billion Tata Communications owns and operates advanced sub-sea cable network, delivering infrastructure, enterprise solutions and partnerships to carriers and
businesses worldwide.

Tata Comm stock price

On September 04, 2014, Tata Communications closed at Rs 385.25, up Rs 13.20, or 3.55 percent. The 52-week high of the share was Rs 412.00 and the 52-week low was Rs 160.00.

The company's trailing 12-month (TTM) EPS was at Rs 15.31 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 25.16. The latest book value of the company is Rs 276.69 per share. At current value, the price-to-book value of the company is 1.39.

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There should be thrust on coal import now: Ex-CIL chairman

Discussing the reasons for coal shortage, Partha Bhattacharya, Former Chairman, Coal India, said this is kind of a situation can occur if Coal India fails to supply coal or there is lesser import by power stations.

Today at least 25 percent of coal is met through imports.

Partha Bhattacharya

Former Chairman

Coal India

The number of thermal plants left with less than seven days of coal reserves has risen from 52 last week to 56 this week , government data showed on Wednesday. Moreover 29 of them are at super critical levels, which means they have coal reserves of under three days.

Discussing the reasons for coal shortage, Partha Bhattacharya, Former Chairman, Coal India , said this is kind of a situation can occur if Coal India fails to supply coal or there is lesser import by power stations.

Below is the transcript of Partha Bhattacharya's interview with CNBC-TV18's Shereen Bhan.

Q: As a former chairman of Coal India how worried would you be and what are the options before the government?

A: The coal that the power houses source are from various places. One of course is Coal India's supply. Second is they have to do certain amount of import of coal and that has to happen as per the time schedule. Now this kind of a situation can occur either because Coal India fails to supply coal; that could be one reason, but that is not always the only reason. Sometimes as you are aware, this year particularly, there have been growth there has been a production growth and so I am not sure whether Coal India as compared to its commitment under the fuel supply agreement have faltered. It may not be so. Then in that case the situation could be because of lesser imports by the power stations. Today at least 25 percent of coal is met through imports.

Q: If I were to just point out what the power minister said, he said that there has been record production in a single month of nine percent by Coal India but yet were faced with this situation. One argument that is being presented is that we have had poor monsoon, demand has been on the higher side, hydel power has been on the lower side but if you were to look at solutions at this point in time what could those be?

A: Right now the domestic coal production is at its peak and there is not much of headroom available to improve up on that then there should be thrust on imports because in any case imports will happen, so why not import now.

Coal India stock price

On August 22, 2014, Coal India closed at Rs 376.00, up Rs 12.35, or 3.40 percent. The 52-week high of the share was Rs 423.50 and the 52-week low was Rs 240.50.

The company's trailing 12-month (TTM) EPS was at Rs 20.04 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 18.76. The latest book value of the company is Rs 26.04 per share. At current value, the price-to-book value of the company is 14.44.

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IBM bets big on India, excited about 'smart cities' project

The company is also seeing a strong revival in the telecom sector and expects clients to start investing. IBM is also on the lookout for acquisitions to build capabilities.

Rebalancing of workforce is an ongoing exercise

Vanitha Narayanan

MD

IBM, India

Global technology giant IBM is betting big on India. Speaking to CNBC-TV18's Sheeren Bhan, its India MD Vanitha Narayanan said the company is excited about the new government's 'smart cities' project.

The company is also seeing a strong revival in the telecom sector and expects clients to start investing. IBM is also on the lookout for acquisitions to build capabilities.

Below is the transcript of Vanitha Narayanan's interview with CNBC-TV18's Shereen Bhan.

Q: Your take on India…

A: There is a level of confidence about both government actions and also policy actions which are now a bunch of private sector actions to occur. So overall I would say confident mood and whether you look at whether it's smarter cities, growth of small enterprises leveraging new technologies or large private clients who have sort of held investments back in and are now ready to go ahead and commit.

Q: Are you beginning to see that already, are clients now putting money on the table because our sense is that while the mood has changed people are not beginning to make investments just yet?

A: I would say probably you can extend it, but we are also seeing it in smaller areas. So definitely I would say in the last quarter, more positive than we have seen in the prior quarters. Some of the big decisions and some of the big investments, yes, we probably have to see a little more time go by but there is movement in terms of proposals. This is the key transformation, this is the key step change, this is something we need to. So we will step in back and revisit those because they can see that this is now going to be a time to act.

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France, Japan in race for India's bullet train corridor

Japan and France are racing each other for a piece of the Ahmedabad-Mumbai bullet train corridor. Companies from both nations have begun studies for the project. CNBC-TV18's Rituparna Bhuyan gets all the exclusive details.

Japan and France are racing each other for a piece of the Ahmedabad-Mumbai bullet train corridor. Companies from both nations have begun studies for the project. CNBC-TV18's Rituparna Bhuyan gets all the exclusive details.

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Jet announces Rs 500 fare offer on domestic route

The all-inclusive fares starts from Rs 500 excluding statutory taxes and customers will be able to enjoy these substantial discounts across all destinations on the airlines' domestic network, the airline said in a release.

A day after budget carrier SpiceJet  announced fares starting at Rs 499 across its domestic network, Jet Airways  too jumped on the bandwagon rolling out Rs 500 fares for the economy class on its domestic flights for a limited period today.

The all-inclusive fares of the city-headquartered Jet Airways, starts from Rs 500 excluding statutory taxes and customers will be able to enjoy these substantial discounts across all destinations on the airlines' domestic network, the airline said in a release.

The bookings under the offer, however, can be made only in two days, starting tomorrow, the airline said, adding that travel under the offer can only be taken January 16, 2015 onwards.

The offer is valid for travel only on direct flights on the airline's domestic network and does not cover group bookings, it said. SpiceJet, which has been rolling out heavy discounts on its ticket prices, starting January this year, had yesterday claimed to have sold more one lakh ticket in a single day under its Rs 499 special fares scheme.

SpiceJet stock price

On September 02, 2014, SpiceJet closed at Rs 13.09, up Rs 0.45, or 3.56 percent. The 52-week high of the share was Rs 23.05 and the 52-week low was Rs 11.10.

The latest book value of the company is Rs -22.24 per share. At current value, the price-to-book value of the company was -0.59.

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Can ITC milk the dairy market?

But long worried about the low-margin returns of the FMCG business, analysts will likely keep a wary eye on the new foray.

Moneycontrol Bureau

Conglomerate  ITC is planning to enter the lucrative dairy market, much of which is currently unorganized while the organized market is dominated by players such as Amul, Nestle, Gowardhan and Brittania.

According to a report in the Business Standard , the hotels-to-tobacco major plans to set up plants in six players and plans to become a pan-India player in the sector.

The move is part of the diversification strategy ITC started a little over a decade ago when cigarettes were its core business.
 
Before this, the company's last move was to venture into the FMCG business. The move came after regulatory concerns over tobacco products were seen to be increasing.

However, cigarettes continue to account for nearly half of the company's consolidated sales and almost all of its net profits.

This shows that the company continues to earn a high profit margin on its tobacco businesses despite the increasingly high amount that has been levied on it in recent years.

Over the years, several analysts have questioned ITC's decision to diversify into other lower-return businesses even as it continues to do well in its core cigarettes business.

Recently, company chairman YC Deveshwar defended the move and said it had established strong brands in the FMCG segment and that its aim was to become the country's number-one player in the business by 2030 with revenues of Rs 1 lakh crore.

He had also then said that the company would eventually look to enter the dairy, fruit juices, tea, coffee and chocolates divisions.

In a 2012 interview, Deveshwar had said ITC would spend about Rs 25,000 crore over the next five-seven years to power its growth in these segments.

But long worried about the low-margin returns of the FMCG business, analysts will likely keep a wary eye on the new foray.

ITC stock price

On August 22, 2014, ITC closed at Rs 350.30, down Rs 4.85, or 1.37 percent. The 52-week high of the share was Rs 386.75 and the 52-week low was Rs 293.50.

The company's trailing 12-month (TTM) EPS was at Rs 11.40 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 30.73. The latest book value of the company is Rs 32.97 per share. At current value, the price-to-book value of the company is 10.62.

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Would look at own retail if FDI rules change: Reebok

It has been 18 months to the Rs 870 crore scam at Reebok India. In these months, the sportswear company has overhauled and restructured its business in India to reposition itself as a fitness goods company. In a chat with CNBC-TV18's Farah Bookwala Vhora, Reebok India's MD, Erick Haskell explains how Reebok's model is evolving further in India with a renewed focus on women consumers, tier 2-3 markets and on the e-commerce platform.

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Confident of shareholders' nod on Guj; no plan B: Maruti

In March, under pressure from institutional investors, Maruti had decided to seek minority shareholders' approval after tweaking some of the earlier proposals for the controversial Gujarat plant.

Maruti Suzuki India  is confident of getting minority shareholders' nod to let parent Suzuki Motor Corp own and invest in its Gujarat facility and has no second option.

"We are thinking of getting voting (done) in October... There is no plan B, I can't see why it should not happen," Maruti Suzuki India Chairman R C Bhargava told PTI in an interview.

He was responding to a query on whether Maruti had other plans if it failed to get the minority shareholders' nod. He was sure of the minority shareholders' nod and that was why the company was not having any second option.

In March, under pressure from institutional investors, Maruti had decided to seek minority shareholders' approval after tweaking some of the earlier proposals for the controversial Gujarat plant.

The company needs 3/4th of the minority shareholders, who hold 44 per cent stake, to approve the proposal through a special resolution.

Bhargava said the management had been busy explaining to its investors, both domestic and overseas, over the past couple of months and they have understood the company's position.

"By bringing in that money (Suzuki's) here we get a very low cost money instead of putting our money. So I get the benefit of low cost money and we get a benefit of having more liquidity, money that I can use without much concern about straining my balance sheet," he said.

The move by parent Suzuki to invest in Gujarat is mainly due to the increasing significance of India in the Japanese firm's global operations, he said.

"Essentially, what has driven the decision to let Suzuki to finance the Gujarat plant is really that Suzuki now understands that their future as a global car maker is going to be increasingly dependent on India," he said.

Bhargava further said: "Today we (Maruti) contribute something like 40 per cent of the total sales volume of Suzuki and about 25 per cent of the profit last year."

Dispelling apprehensions about Maruti becoming just a trading channel of the Gujarat plant, he said: "In all respects, the Gujarat plant will function as a Maruti plant... we control when the production lines are established, when we need more capacity, we will determine what needs to be produced and how much is to be produced.

"We will control the supply chain. We will control the sale. So in what way it is different from as if I have put the plant? And that's what we have been telling the investors."

The Gujarat plant is expected to be commissioned by the middle of 2017. When it becomes fully operational, Maruti's total available annually capacity will be 3 million, up from its current 1.5 million from the Gurgaon and Manesar plants.

Maruti Suzuki stock price

On August 22, 2014, Maruti Suzuki India closed at Rs 2784.35, up Rs 14.80, or 0.53 percent. The 52-week high of the share was Rs 2823.95 and the 52-week low was Rs 1217.00.

The company's trailing 12-month (TTM) EPS was at Rs 96.45 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 28.87. The latest book value of the company is Rs 694.45 per share. At current value, the price-to-book value of the company is 4.01.

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Coal India disinvestment to be taken by Cabinet this week

A planned stake sale in Coal India (CIL) in the last financial year had to be deferred after stiff opposition from the trade unions. The coal major had to make up for that by paying about Rs 19,000 crore as dividend to the exchequer.

The government is likely to soon approve disinvestment of  Coal India Ltd this week which may fetch the exchequer Rs 22,000 crore. The proposal for 10 percent disinvestment of Coal India Ltd would be taken up by Cabinet Committee on Economic Affairs (CCEA) this week, sources said.

A planned stake sale in Coal India (CIL) in the last financial year had to be deferred after stiff opposition from the trade unions. The coal major had to make up for that by paying about Rs 19,000 crore as dividend to the exchequer.

The government, which holds a 89.65 percent stake in CIL, initially sought to divest a 10 percent stake but lowered it to 5 percent on account of opposition from the unions.

At Thursday's closing share price of Rs 356.40, a sale of 10 percent stake or 63.16 crore shares in CIL would fetch the government more than Rs 22,428 crore.

This will make up for more than half of the total disinvestment target of the current fiscal.

In the Budget, the government has estimated to collect Rs 43,425 crore from selling stake in PSUs and another Rs 15,000 crore from sale of residual stake in the erstwhile government companies.

Of the disinvestment target of Rs 40,000 crore in 2013-14, the government had mobilised Rs 15,820 crore. In 2012-13, of the Rs 30,000 crore target, Rs 23,957 crore was raised. In 2011-12, only Rs 13,894 crore was raised of the Rs 40,000 crore target.

Coal India stock price

On August 22, 2014, Coal India closed at Rs 356.40, down Rs 1.7, or 0.47 percent. The 52-week high of the share was Rs 423.50 and the 52-week low was Rs 238.35.

The company's trailing 12-month (TTM) EPS was at Rs 20.04 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 17.78. The latest book value of the company is Rs 26.04 per share. At current value, the price-to-book value of the company is 13.69.

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