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Wednesday, September 03, 2014

Shipping ministry in talks with firms to set up fund of up to Rs.15,000 Cr to extend low-cost loans
Bangalore, September 02 2014.: The shipping ministry has initiated discussions with financial institutions such as IFCI and IDBI to establish a fund of as much as Rs.15,000 crore to extend low-cost loans to shipbuilders. The shipbuilding development fund will form a key part of a policy being drafted by the shipping ministry to promote local shipbuilding as announced by finance minister Arun Jaitley in his budget speech on 10 July. 

“We are discussing the finer details of the shipbuilding development fund with IFCI and IDBI,” a shipping ministry spokesman said. Other features of the policy could include granting special economic zone (SEZ) status to shipyards and declaring it as a strategic sector with attendant fiscal incentives. 

“Shipbuilding is a big opportunity today,” Prime Minister Narendra Modi said on 16 August during the foundation stone laying ceremony for a special economic zone (SEZ) and road connectivity project at Jawaharlal Nehru Port Trust located near Mumbai. “India’s contribution to global shipbuilding has been very low. South Korea, a very small country, smaller than the state of Maharashtra today alone has a 40% share of global shipbuilding,” Modi said. 

“We want to encourage shipbuilding.” Elaborating on his theme of “come, make in India”, which he mentioned during his Independence Day speech, Modi said his government will encourage foreign investment in shipbuilding. India, Modi said, has a large army of youngsters which was as long as the country’s vast coastline. “We have young people, skilled manpower who can be easily mobilized. Shipbuilding is also not about technology. 

Turner, fitter, welder also are involved in shipbuilding. The poorest of the poor gets employment,” Modi added. Local shipbuilders have been struggling to get orders for constructing merchant ships after the global recession of 2008. Indian shipyards are outbid by Chinese and Korean shipyards due to cost differentials arising from lack of support for the industry in India, said a spokesperson for the Shipyards Association of India, an industry lobby. 

“On the other hand, foreign shipyards benefit from direct fiscal and non-fiscal support from their respective governments,” he said. Indian shipyards pay an interest of 13-14% on capital expenditure and working capital loans for purchasing raw materials and other inputs as against around 4-6% in countries such as China and South Korea. 

“The differential interest cost imposes a significant cost burden on Indian built ships,” the Shipyards Association spokesman added. China’s EXIM bank gives preferential loans to its domestic shipyards at rates as low as 2.7% which provides a huge cost advantage to Chinese shipyards, especially when a ship is financed at debt-to-equity ratios which are as high as 90:10 and the working capital requirements for building a ship can be as much as 35% of the cost of a ship, on an average, during its construction period, the ministry spokesman said. 

“Korea, China and Japan have pursued a mix of fiscal and non-fiscal incentives for encouraging growth and development of their shipbuilding industry. Shipbuilding is a capital intensive industry with a sell first, build later model where buyers pay a small percentage of the price of the ship upfront. This requires shipbuilders to invest substantial capital in executing orders,” the spokesman said. “Availability of loans at a low cost is a significant support provided by most shipbuilding countries to their yards.”

CourtesyLive Mint

Monday, September 01, 2014

Financial  Technologies Ltd
CMP: Rs.254.80
24 August 2014: Jignesh Shah, founder and promoter of Financial Technologies Group, who was out of action following the Rs 5,500- crore National Spot Exchange scam, has secured bail. 

Shah's high-profile friends may have deserted him, but his core team-his friend and cofounder of Financial Technologies Dewang Neralla, brother Manjay Shah and cousin Paras Ajmera-is said to be conducting business in his absence.

In fact, insiders say it is Ajmera, who is carrying out all crucial behind-the-scene operations. Some in the market believe that Ajmera is a master strategist and close to the broking fraternity. 

Such is Ajmera's hold that he is said to have even controlled the salary of every employee in the company. Last November, Ajmera resigned as a director from the Board of MCX, but sources say he was the architect in signing the deal with Kotak Mahindra Bank for selling Financial Technologies' 15-per cent stake in the Exchange for Rs 459 crore.

Courtesy: Mail Online

The great Indian financial inclusion circus 
To be fair to Narendra Modi, he has resorted to inclusion at gunpoint out of sheer frustration as lazy bankers have been refusing to expand their services writes, Tamal Bandyopadhyay
According to a 2012 working paper of the 
World Bank, only 35% of India’s adult 
population has access to formal banking
AUG 31, 2014: For about a million public sector bank employees, the past fortnight has been extremely hectic. Senior executives could hardly sleep; they were busy video conferencing with colleagues in every state and even district while junior employees were literally on the street, chasing prospective depositors—something never seen in the history of Indian banking. 

They were put on notice on Independence Day, when Prime Minister Narendra Modi announced the Pradhan Mantri Jan Dhan Yojana as a national mission on financial inclusion and fixed 28 August as the launch date. In his address, Modi spoke about the ambitious project to offer banking facilities to all households in India to complement the Bharatiya Janata Party-led National Democratic Alliance government’s development philosophy of Sab Ka Sath Sab Ka Vikas; he followed it up with a personal letter to all senior bankers. 

He wrote, “We need to enrol over seven crore households and open their accounts. This is a national priority and we must rise to meet this challenge. There is an urgency to this exercise as all other development activities are hindered by this single disability.... I will myself recognize the achievements of the best-performing branches.” One cannot find fault with Modi’s earnestness. People in remote villages drink American fizzy drinks like Coke and Pepsi and carry mobile telephones in their pockets but they are pariahs when it comes to banking; India’s banks do not find doing business with them profitable. 

According to a 2012 working paper of the World Bank, only 35% of India’s adult population has access to formal banking. So, what’s the Pradhan Mantri Jan Dhan Yojana all about? It’s aimed at bringing at least 75 million un-banked families into India’s banking system by opening two bank accounts per household in rural and urban pockets. All such accounts are being linked to the RuPay debit card, a domestic card network. Every individual who opens a bank account becomes eligible to receive an accident insurance cover of up to Rs.1 lakh and once the bank account has been active for six months and linked to the account holder’s Aadhaar identity number, he or she would become eligible for an overdraft of up to Rs.5,000. 

Last Thursday, the government rolled out the programme, claiming about 15 million accounts were opened, exceeding the first day’s target of 10 million. An excited Modi shortened the deadline for achieving the target of 75 million new accounts to 26 January from 15 August 2015. He also topped up each account with life insurance cover of Rs.30,000, adding to the Rs.1 lakh accidental insurance benefit. “Never before in economic history were 15 million bank accounts opened on a single day,” Modi said. Many Union ministers and at least 20 chief ministers simultaneously launched the scheme in states. Information and broadcasting minister Prakash Javadekar launched it in Pune, law minister Ravi Shankar Prasad in Chennai, external affairs minister Sushma Swaraj in Bhopal, home minister Rajnath Singh in Lucknow and human resource development minister Smriti Irani in Surat. Nirmala Sitharaman, minister of state for finance, even cancelled a visit to Myanmar to be part of the launch. I happened to be present at minority affairs minister Najma Heptulla’s launch function in Kolkata. 

Forty-odd financially included persons, who opened accounts on that day, walked into a five-star hotel for the first time in their lives and were treated to tea and cookies after Heptulla handed over to them a RuPay debit card and a passbook which says, Mera Khata–Bhagya Vidhaata. It didn’t take much time to find out that for all of them, it was not their first bank account. Clearly, the banks wanted to meet the target at any cost. A retired banker even compared this programme with the late Sanjay Gandhi’s compulsory sterilization programme in 1975. 

At that time, the health department in various states forced many to undergo sterilization more than once to meet their targets. Bankers followed the same path—beg, borrow or steal, get a human being to open a bank account; it doesn’t matter whether the person is already financially included. Should we blame Modi for the great Indian financial inclusion circus? 

To be fair to him, he has resorted to inclusion at gunpoint out of sheer frustration. Lazy bankers have been refusing to expand their services, citing high transaction and technology cost for going rural, while they are sanguine about thousands of crores in loans, given to corporate borrowers, turning bad. For the first time, in January 2006, the Reserve Bank of India had allowed banks to appoint business correspondents and address the so-called last mile problem in providing banking services to the masses, but nothing much has happened except for opening millions of so-called no-frills accounts. 

By December 2013, banking connectivity had been extended to 328,679 villages from 67,694 in March 2010 and 229 million basic accounts have been opened, but how many of them are operational? Financial inclusion is the process of ensuring access to financial services and timely and adequate credit to weaker sections and low income groups at an affordable cost. Merely opening a bank account doesn’t ensure that. 

Unlike Sanjay Gandhi’s sterilization programme or the government’s Pulse Polio immunization initiative, financial inclusion cannot be achieved only by meeting the target numbers. Pushed to the wall, banks will hit the target by doling out passbooks indiscriminately to anybody and everybody, including those who already have bank accounts. 

The government must make the bankers accountable and, at the same time, ensure that financial inclusion is supported by inclusion in infrastructure, education and other socio-economic areas. Finally, we need many more banks. Until now, licences for new domestic banks have been a once-a-decade affair. 

Tamal Bandyopadhyay, consulting editor of Mint, is adviser to Bandhan Financial Services Pvt. Ltd, India’s newest bank in the making. He is also the author of Sahara: The Untold Story and A Bank for the Buck.

Courtesy: Live Mint
Abhishek Bachchan, John Abraham photobomb Sachin Tendulkar’s selfie at ISL launch! 
Please Click on the Photo to Expand
New Delhi, Aug 28, 2014: Master Blaster Sachin Tendulkar’s modest attempts of clicking a selfie were photobombed by Bollywood celebs Abhishek Bachchan and John Abraham in Mumbai on Thursday. The trio also doubles up as team owners in the ambitious Indian Super League (ISL), a franchise-based football league set to start on October 12. The inaugural edition will conclude on December 20.

Modelled around the cash-rich Indian Premier League (IPL), the ISL stipulates two games for each team against every team in home and away format. Depending upon their respective ranks and points, top four teams will qualify for the knock out round, ie the semi finals.

Semi finals will also be played in home and away format, making it a total of four semi-final matches. 

With base price of each team set at Rs 12 crore, the most expensive franchise is the Kolkata team, which was won by a group that had former skipper Sourav Ganguly, alongside businessmen Harshavardhan Neotia, Sanjiv Goenka, Utsav Parekh, and Spanish La Liga side Atl├ętico Madrid, for approximately Rs 18 crores.

Master Blaster Sachin Tendulkar, alongside PVP Ventures, owns Kerala Blasters.

Among B-town celebs, John Abraham, partnering with Shillong Lajong, owns the Guwahati team.

Ranbir Kapoor, alongside Bimal Parekh, won the bidding of the Mumbai team while Salman Khan won the Pune team with the Wadhawan Group. The Delhi team was won by DEN Networks while the Chennai team was won by a consortium headed by Abhishek Bachchan. The Goa team was won by a three-way partnership between Videocon, Dempo, and Salgaocar.

Apart from the 14 Indian players, seven international players and one marquee player each that the teams have contracted, franchises can independently contract up to five more players.

Courtesy: Daily Bhaskar

Friday, August 29, 2014

IVRCL eyes selling assets, raising equity
[Editor: The article below says that half its current order book of Rs.20,000 crore is from the lucrative water segment, such as water treatment and irrigation. IVRCL Ltd (Rs.18.10) expects growth of around 15% a year. “If the next two quarters will see consolidation, the next fiscal would be a turnaround year,” said Reddy, Chief Financial Officer of IVRCL. Meanwhile the government on Wednesday, 27 August 2014, took a decision to allow the Ministry of Road Transport and Highways to decide on mode of delivery and amendments in Model Concession Agreement in respect of national highways projects for expediting of implementation of road infrastructure projects in the country. A strong buy is recommended, with a price target of Rs.37-39, for 6-9 months perspective]
Hyderabad/Chennai. August 28:  Infrastructure company IVRCL, once a stock market favourite, is now struggling to script a comeback.

The company had to go for corporate debt restructuring in January this year after debt piled up in the wake of cost overruns and delays in project execution. IVRCL’s total debt stood at Rs.7,680 crore as on March 31.

As part of a turnaround plan, the company is now considering selling operational assets, raising equity, and taking up projects that require lower capital infusion.

“The liquidity position has begun to improve. The next two quarters will be a phase of consolidation,” says R Balarami Reddy, Chief Financial Officer of IVRCL

Execution held up

Stalled execution of some projects due to delays in receiving Government clearances was one of the factors that derailed the company.

Road projects such as Sion-Panvel and Goa-Karnataka, irrigation projects in Andhra Pradesh, rural electrification in Kerala are among those delayed in 2011. The company’s execution rate, which used to be 40 per cent of the order book a year, fell to 26-28 per cent in 2011-12.

IVRCL also had to contend with delayed payments from clients. The debtors’ cycle stretched from 115 days in 2011-12 to 147 days now. Audit reports drew attention towards the receivables worth Rs.157 crore, considered good (even as collection was pending for a prolonged period) in the 2011-12 report, which ballooned to Rs.937 crore by June 2014.

Cost overruns in projects due to higher costs of raw materials such as cement, bitumen, labour, and steel over the years also cut into profitability. This was exacerbated by the lack of price escalation clauses on many contracts. Operating profit margin collapsed, sinking from 11 per cent in 2010-11 to 1 per cent in 2013-14 on a consolidated basis.

The company’s revenue, which grew 14 per cent on a standalone basis in December 2010 quarter, fell by 17 per cent in the June 2014 quarter, though numbers are not strictly comparable due to demergers and reconsolidation.

Restructuring

The debt-equity ratio leaped from 1.6 times (consolidated) in 2011-12 to 3.8 times by 2013-14. In the period, companies also had to contend with an increase in interest rates from 8 per cent to 12-13 per cent, says CFO Reddy. Interest cost as a percentage of sales reached 15.9 per cent in 2013-14, while interest cover slipped below 1 time. Consolidated net losses mounted from Rs.240 crore (adjusted) in 2012-13 to ₹882 crore last fiscal.

“Having a strong order book and a good portfolio, we were able to manage the situation for about 18 months. However, thereafter, we began to feel the heat. Then we had to knock at the CDR (corporate debt restructure) cell as lenders were not extending necessary funds for projects and were also encashing bank guarantees,” adds Reddy.

The CDR process was finalised in July. The package comes with a 28-month moratorium and an interest rate of 11.25 per cent.

Of the company’s total debt, the holding company debt of Rs.3,850 crore has been restructured, saving about Rs.850 crore in interest payments for two years.

IVRCL paid out Rs.789 crore in interest last fiscal. In addition, IVRCL received Rs.215 crore in cash credit and Rs.175 crore of priority debt.

IVRCL has also signed agreements to divest stake in three road projects – Salem Tollways, Kumarapalyam Tollways and Chengapally Tollways – to Tata Realty. This can ease up equity of around Rs.600 crore and free debt worth Rs1,200 crore.

Another road project (Jalandhar to Amritsar) is on the block as is its Chennai desalination plant. All are loss-making projects and contribute less than 10 per cent of consolidated revenue.

The company also has a land bank of around 1,700 acres, which it can monetise if needed. A rights/ QIP issue of Rs.300 crore is also being planned. These moves can eventually bring the debt-equity ratio down to around 2 times.

Turning around

This apart, once its existing five road projects are done, the company will shift entirely into simple construction contracts in roads, instead of taking them on as a developer (projects taken on as a developer call for heavy capital investments).

Plain construction contracts have short execution periods which will generate quicker cash flows and lower funding requirements. With the plain construction route to road expansion being taken up by the highways authorities, IVRCL could find several such projects coming its way.

Half the current order book of Rs.20,000 crore is also from the lucrative water segment, such as water treatment and irrigation.

The thrust now is also on this segment. Indeed, IVRCL has never had trouble securing fresh projects; from the start of this year, for example, it has won Rs.3,657 crore worth of projects.

The company expects growth of around 15 per cent a year.

“If the next two quarters will see consolidation, the next fiscal would be a turnaround year,” said Reddy.

This is part of a series on how companies are managing debt to gear for better times.

Wednesday, August 27, 2014

FTIL to 'highlight correct facts' of MCX-SX buyback to CBI
Photo: Business Standard
27 Aug, 2014: MUMBAI: Financial Technologies (India) or FTIL has clarified to the BSE that it would make a representation to CBI "highlighting the correct facts" with regard to the "alleged illegality" of the buyback arrangement between itself and a nationalised bank of MCX Stock Exchange's shares. 

CBI on Monday lodged an FIR against three serving officials and a former one of Sebi, and Jignesh Shah, promoter of FTIL — the erstwhile promoter of MCXSX — alleging that the promoters of the bourse had entered into a buyback arrangement with a nationalised bank, in violation of relevant rules, and "in connivance with Sebi officials, deliberately suppressed this material fact" while applying for an extension of recognition of MCX-SX, to conduct trade in currency derivatives in 2009. 

The FTIL stock closed down almost 5% at Rs 259 apiece on Tuesday. 

FTIL in its clarification pointed out that the Bombay High Court found "nothing illegal in the said buyback arrangement" while hearing a petition filed by MCX-SX against a Sebi order of 2010 declining to give it permission to operate as a full-fledged stock bourse, other than for offering currency derivatives. 

Further, at the time of the extension of recognition of MCXSX in the year 2009, "we understand that MCX-SX only sought time from Sebi for reducing the shareholding to comply with the applicable Sebi regulations. 

We understand that at that point of time, no statement/representation was made by MCX-SX to Sebi in its application for extension that it was in compliance with all the relevant Sebi regulations. Therefore, the question of concealing certain facts by the promoters of MCX-SX does not arise," said FTIL. 

It further added that as required by law, the application for renewal/extension of recognition was made by MCX-SX and not by its promoters (i.e. FTIL) or Jignesh Shah. 

Courtesy: The Economic Times
NSEL: Jignesh Shah’s fall from grace and why he will weather it
Photo: Live Mint
Aug 5, 2013: One question that has risen ever since troubles at National Spot Exchange emerged is: what will happen to Jignesh Shah and the empire he built on his entrepreneurial spirit?

Jignesh Shah's has been a story of both backward and forward integrations. He started off in the business of exchange technology, went on to set up exchanges, both commodities and equity, and also ventured into many related businesses.

The growth of his flagship company Financial Technologies (FT), which is also the holding company, has been envious.

Initially a technology services provider for stock exchanges, FT set up Multi Commodity Exchange, which went on to dominate the Indian commodity futures trading market.

Under a weak Forward Markets Commission, which did not have much power, commodity futures trading in India was thriving, with turnover running into trillions.

For FT, MCX was a money spinner. The exchange offered lower transaction charges as the technology that it used for trading came from its own parent company.

Shah spotted business opportunity around MCX and was quick to cash in on those.

He set up National Bulk Handling Corporation (NBHC), National Spot Exchange and even a real time market data provider TickerPlant.

Initially, NBHC set up warehouses for those commodities traded on MCX. Later on, it saw a bigger business opportunity by offering warehousing services to farmers and also started facilitating bank credit to farmers.

According to a report in Business Today magazine published in 2009, as a facilitator of farm credit, NBHC got two-way fee - 25 basis points from farmers and 25-75 bps from banks.

With the government allowing trades in warehousing receipts, it is not only NBHC that got a boost, but NSEL too got advantages.

Warehousing receipts are the receipts that farmers got while storing their produce in NBHC warehouses.

(Ironically, these are the very instruments that have come into focus in the present controversy involving NSEL. It has been found that the spot exchange, where short sales are not allowed, had actually permitted warehouse receipts trading, without checking whether the trader had the underlying commodity in the warehouse.)

NSEL thrived in a regulatory vaccum. While FMC regulated the futures market, the spot exchanges came under the state government. There was no clarity as to who regulated the spot markets. It was an exemption from the Union ministry of consumer affairs that enabled the NSEL to launch a product that had characteristics of forwards contract.

After launching NSEL, FT set up the real-time data platform even as plans were on to roll out a stock exchange. The data service had to be scaled down and the equity exchange, MCX SX, was launched after much delay because of Sebi's reservations and the legal battle that ensued.

According to the Business Today report, the vision behind all these moves was financial inclusion.

"FT's strategy is based on driving financial inclusion by reaching out to the bottom of the pyramid as this will drive future business," the report quotes Sanjeev Patkar, Director (Research), Dolat Capital, as saying.

Clearly, Shah aimed higher. As part of his strategy to take his business international, he started the Dubai Gold and Commodity Exchange (DGCX) in partnership with Dubai Multi-Commodities Centre (DMCC).

As the old adage goes, the higher you go, the steeper the fall.

The share prices of Financial Technologies fell a sharp 70 percent, in just two days after the troubles at NSEL emerged.

According to a report in the Business Standard, in the boom year of 2007-08, Financial Technologies was valued over Rs 13,000 crore. Now, it is down to just about Rs 700 crore.

According to an Economic Times report, Shah himself witnessed a wealth erosion of about Rs 1000 crore.

There are many theories-including conspiracy angles-about what resulted in the down fall.

Sudip Bandyopadhyay, managing director and chief executive officer of Destimoney Securities, sums up it all in a report in Mint.

"He (Shah) has probably bitten off more than he can chew."

According to him, Financial Technologies' troubles started with MCX-SX. "The problem started when the group tried to get into the stock exchange business," he has been quoted as saying in the report.

The BS report says trouble may be brewing at DGCX as DMCC has taken technology of Cinnober, another exchange technology provider, instead of FT's. It also says FT may be planning to sell off its 44 percent stake in DGCX.

But is it all over for Financial Technologies and Shah? Many are of the opinion it is not.

"I never quite liked his style. But he has that ability to come out of difficulties," PH Ravikumar, former CEO of NCDEX and once an arch rival of Shah, has been quoted as saying in the ET report.

Courtesy: Firstbiz
Share buyback arrangement was legal, says FTIL 
FTIL clarification in response to FIR registered by CBI
Mumbai, Aug 27 2014 Financial Technologies (India) Ltd. (FTIL) has said that the buyback arrangement for shares with shareholder banks of MCX Stock Exchange (MCX-SX) was declared legal by the Bombay high court while hearing the matter between the exchange and the capital markets regulator. 

The FTIL clarification was in response to the first information report (FIR) registered by the Central Bureau of Investigation (CBI) on Monday for alleged violations while granting extension to MCX-SX. According to CBI, the buyback agreement entered into with the banks was illegal. 

“The Bombay high court, in its order, (Page No. 145 Para VII) had ruled that “the buy-back agreement cannot be held to be illegal as found in the impugned order of the whole timer member of SEBI on the ground that they constitute forward contacts. Hence, the accusation of CBI does not hold ground,” said FTIL.

Courtesy: Live Mint

Financial Tech contests CBI charges
Photo: First Biz
[Editor: Mr.Jignesh Shah, was a non-executive director of NSEL and was not involved in its day-to-day operations. Mr.Shah's lawyer Mahesh Jethmalani has reportedly argued in court that Shah had no knowledge of the crisis, saying it was perpetrated by a clutch of NSEL employees and brokers, including Anjani Sinha, former chief executive of the commodity exchange. FTIL's net profit rose 57.93% to Rs.128.24 crore on 27.43% increase in total income to Rs.216.05 crore in Q1 June 2014 over Q1 June 2013. FTIL is among the global leaders in offering technology IP (Intellectual Property) and domain expertise to create and trade on next generation financial markets. It is a global leader in creating and operating next-generation tech centric financial exchanges]
MUMBAI, AUGUST 26:  Financial Technologies has contested CBI's charges of irregularities in grant of licence last year to its subsidiary MCX Stock Exchange. The CBI had accused Financial Technologies of entering into a buyback agreement with banks while reducing its stake to meet SEBI norms.

FTIL has quoted the Bombay High Court order to clarify that the “buy-back agreement cannot be held illegal as found in the impugned order of the Whole Time Member of SEBI on the ground that they constitute forward contacts.” Hence, the accusation of CBI does not hold ground, said the company.

Promoter not liable
On the CBI indictment for not disclosing the buyback agreement to the regulator at the time of application seeking extension of the MCX-SX licence, FTIL said the application was filed by the exchange and not by the promoter-company. Therefore, the promoter is not liable for the matter, it said.

MCX-SX was set up by FTIL and its commodity exchange arm MCX and began functioning as a full-fledged stock exchange last year after a prolonged battle with SEBI.

On Monday, CBI filed FIRs against three serving SEBI officials Muralidhar Rao, Executive Director; Vishakha More, Assistant General Manager and Rajesh Dangeti, Deputy General Manager. It also filed an FIR against former Executive Director JN Gupta besides FTIL promoter Jignesh Shah for alleged irregularities aimed at obtaining a licence to operate the stock exchange.

Courtesy: The Hindu Businessline