Indian Business And Finance

Should you take that insurance policy?

2008-05-20T10:19:00.000-07:00

A couple of weeks ago, an old friend of mine wanted help regarding his investments. While he was comfortable with a wide range of products, insurance was a strict no for him. His argument was “why should I make my widow richer than wife?”. It’s an argument I come across often particularly from those who have built wealth through aggressive stock picking or mutual funds. Their argument is: why bother about insurance when the same money can be used to earn 25-30% returns!
Much of the criticism against insurance is also due to the fact that it has been sold rather than the investor asking for it. The fact that every investor ends up getting at least one call a month from an agent doesn’t help matters much. As a result, most insurance policyholders have been sold a policy according to the selling techniques of the agent and needless to say, most policyholders are not aware of their policy details. However, the time has come for investors to change a few things about their thoughts on insurance and here is why.
To start with, most of us have been steadily increasing the balance on our liability account. Unlike our parents or grandparents who believed in spending out of their income, the current generation has been partly funding its spending. As a result, an average Indian middle class family will have a combination of loans in its portfolio ranging from home loans to car loans to personal loans. Even if some one manages to keep away from these loans, he is sure to carry a small liability on his credit card. While the individual may have the regular source of income to clear his dues over the long term, an unexpected event such as death could change the picture and the family could end up with a loan bag of a few lakhs of rupees.
Many argue that they have enough in the kitty to take care of the family over the long term in the form of property and bank balance and hence don’t need to set aside cash for an insurance policy. However, many don’t realize that a few thousands of rupees can help the individual’s family from using up long term assets. Take the case of a 45-year old individual who is sitting on a loan of Rs 30 lakhs borrowed to invest in a property which at present costs around Rs 45 lakhs. Let us assume that the individual has invested in the property only a couple of years ago and hence there is not much change in the loan figure. As you are aware, the principal amount comes down in a small way during the first few years of the loan tenure.
Now, let us assume that the individual has not made an effort to go in for the required insurance cover and on the other hand, is happy with the Rs 5 lakh cover (which was forced upon by him during the early part of his career by his insurance agent uncle). He had kept away from insurance on the pretext that there wasn’t much liquidity after paying home loan EMIs. Because of the property investment, even his investment portfolio was not impressive and he could manage to build a liquid asset portfolio of only a couple of lakhs.
Consider an event where the above individual meets up with an accident and suffers untimely death. Now the burden of loan repayment falls on the spouse who does not have a regular source of income. Property being the only asset, she is forced to sell it to cover up the dues. In addition, she has to worry about the future of two children who would take at least a decade to provide regular source of income to the family. From a situation of comfortable living with own property and a healthy bank balance, the family is forced to worry about debts and future living due to lack of planning.
The individual could have saved the trouble of sale of property for his family if he had set aside around Rs 25,000-30,000 towards a term insurance plan. If you break that into monthly component, the cost works out to around Rs 2,500 per month. Surely, it is not a big sum to protect a property which is worth Rs 45 lakhs and ensure a peaceful future for the dependants?

Telecom outsourcing deals under Trai lens

2008-05-20T10:13:00.000-07:00

New Delhi: The Telecom Regulatory Authority of India (Trai) has started monitoring changes in the contractual agreements of operators to ensure that they do not adversely impact the annual licence fee earned by the government and follow licence conditions.
The government gets part of the revenue earned by operators as licence fee under the revenue-sharing agreement with operators.
The regulator is currently monitoring the restructuring deals of at least three key companies — Bharti Airtel's outsourcing agreements, Reliance Communications' dual company structure, and Tata Teleservices' contract with Virgin Mobile.
The regulator is also planning to closely look at the new trend of operators spinning off their tower businesses and assets into separate companies. Trai Chairman Nripendra Misra said: "These are not probes or investigations but we are definitely monitoring.
We are not distrusting companies but we must monitor changes." Misra added, "New companies for the tower business are being formed, the assets are being transferred to them, a sharing formulation will come up and we want to understand what is the relationship that will develop (between the parent company and the tower company).
We want to ensure that it does not affect the annual licence fee as various issues on transfer pricing come up." Taking the example of the structure of the Reliance Anil Dhirubhai Ambani Group telecom business, Misra said it has two companies, one that owns the network assets and the other that is responsible for all the recovery receipts and billing."We are looking at who owns the subscriber, whether the billing was going in the name of the parent company or the contracted company with whom they have a relationship, what is the compensation being paid by the parent company to the second company and is that compensation realistic," Misra explained. Misra said they have already had three preliminary meetings with the company and there is nothing that the regulator has been able to pinpoint.
Giving another example, Misra said that they are also looking into the structure of the Bharti Airtel outsourcing dealwith Ericsson, which maintains their networks. "Networks are being maintained by others now and we don't even know whether the import of the equipment has come through the outsourced company or come through the parent company. That is what we want to know," he said.

IPOs unpopular with firms

2008-05-20T10:08:00.000-07:00

Mumbai: Infrastructure construction company Rithwik recently opted for a private equity investor (Baring Asia) as against an initial public offer (IPO) for its fund requirements.
Though the Hyderabad-based company had filed its draft red herring prospectus (DHRP) with the Securities and Exchange Board of India (Sebi), it changed its decision to go ahead with the process because of volatile stock markets and the resultant impact on its valuations.
Rithwik is not an isolated case. There are a host of companies that have filed the prospectus with the capital market regulator, but have chosen against it. According to the norms, a company has to come out with its public issue within 90 days of its prospectus being approved by Sebi. If it fails to launch the IPO within the stipulated time, the approval lapses and the company has to restart the exercise.
According to Delhi-based Prime Database, a company that tracks the developments in the primary capital market, Acme Tele Power (Rs 1,200 crore), Pride Hotels (Rs 250 crore), Vascon Engineers (Rs 350 crore), TCG Lifesciences (Rs 175 crore), Surya Foods & Agro (Rs 136 crore), Neel Metal Products (Rs 125 crore) and Prince Foundations (Rs 300 crore) have received the Sebi approval, but have not tapped the market.
When markets are topsy-turvy, everyone, including the companies' management, merchant bankers, retail and institutional investors, chickens out.
"It's the question of valuation and whether the market is willing to take it. It also depends on how keen the company is in raising funds through the IPO, the opportune time and the urgency to list it," said a senior executive of a leading investment bank, who is currently doing road shows for companies to assess the appetite of financial institutions for IPOs, which has dried up substantially in recent times.
The support of well-known institutional investors, to a large extent, boosts the success rate of an IPO.
Bankers opine that not only retail investors, but even institutional investors are very cautious about investing in this market condition.
However, there are exceptions too. Companies with smaller issue sizes were brave enough to come out with their issues and did meet with decent subscription.
For instance, Gokul Refoils and Solvent, Anu's Laboratories and Aishwarya Telecom sailed through the IPO market quite comfortably.
Consider this: 2007 saw 100 companies raising Rs 34,179 crore from the primary market, but during the four months of 2008, 18 companies have raised about Rs 14,908 crore.
"IPOs can be typically floated only in a stable or a buoyant secondary market. First the market crash in January this year and then huge volatility thereafter have made most issuers wary.
"The issuers expect higher value, but the market is in no mood to accept it, given the present depression. As many as 24 companies have currently got the Sebi approval and, in good times, they would have immediately rushed to the market. Given some stability in the market, the good news is that at least some of these, including UTI Asset Management, are now gearing up with their plans to hit the market," said Prime Database CMD Prithvi Haldea.

Bharti Airtel, SingTel plan funds for MTN buy

2008-05-20T10:05:00.000-07:00

Mumbai: Billionaire Sunil Mittal, the founder of Bharti Airtel, plans to set up a separate company in partnership with Singapore Telecommunications (SingTel) that will be the vehicle for acquisition of the South Africa-based MTN Group, according to sources close to the deal.
The special purpose vehicle (SPV) will raise funds, including bridge loans. The company will later explore the option of selling American depository receipts (ADRs) or global depository receipts (GDRs) to repay the bridge loan, the sources said. Indian firms, including Tata Steel, in the past have formed SPVs to acquire foreign companies to protect local operations and also to avoid legal hindrances. The SPV may be registered in a tax-haven country, like Mauritius or Bahamas, the sources said.
The move to float an SPV will help Bharti Airtel to continue being listed on Indian stock exchanges, while MTN's promoters will be given a stake in the SPV. The quantum of the stake will depend on the cash-share ratio, which is yet to be finalised between Bharti and MTN. Bharti Airtel would raise funds by diluting the equity of the SPV and, if needed, the promoters' stake in Bharti and that of its partner SingTel to part-finance the deal.
Airtel may have to go for an open offer — merger or acquisition of over 35 per cent stake triggers an open offer in South Africa — and merge the companies' selected businesses into the SPV. As the effective foreign direct investment in Bharti Airtel is about 68 per cent (it should not exceed the 74 per cent limit set by the government), MTN would not be offered a stake in it. However, in Bharti Telecom, the foreign holding is only 42.8 per cent — SingTel holds 32.8 per cent, while Vodafone holds 10 per cent.
Thus, the SPV will be a subsidiary of Bharti Telecom and a stake in it will be offered to MTN promoters, said sources. Bharti Telecom owns a 45.31 per cent in Bharti Airtel, of which the Mittal family holds around 26 per cent. The MTN management holds over 13.3 per cent in MTN through Newshelf664. Lebanon's Mikati family owns 9.8 per cent stake.
"In return for the equity given to Bharti, the promoters of MTN will get cash and stake in the SPV. The Indian telecom major will pay the cash for the stake held by public and financial institutions. Bharti Airtel is looking at raising a bridge loan of around $15 billion for the cash portion of the deal. The remaining amount will be raised through internal accruals and fresh issue of Bharti's and the SPV's shares," banking sources said.
To initiate the merger move, Bharti Airtel executives are expected to hold talks with financial institutions and foreign institutional investors, who hold stakes in MTN. The move is to win the confidence of investors in the wake of counter-takeover offers from other players, like UAE-based Etisalat.
When contacted, a Bharti Airtel spokesperson said: "We have already issued a statement and have nothing further to add to our last statement." At this stage, MTN is not commenting further than the cautionary announcement released on May 5, 2008," an MTN spokesperson said.
Cost-sharing, co-branding, marketing, operations (existing and new), human resource sharing and employee relocation to other countries, among others, would also be conducted through the SPV. As equipment and software purchases are huge for telecom companies, the merger would give joint bargaining power to Bharti. "The SPV would also look at listing on the New York Stock Exchange, where valuations of telecom companies are relatively higher," said a source.The SPV would also be the vehicle for the Bharti Airtel-MTN combine's future acquisition plans in the US and Europe.

RIL offers largest employee stock option

2008-05-20T09:56:00.000-07:00

Mumbai: Riding the construction of a new refinery and several retail outlets, Reliance Industries Ltd (RIL) is turning a new leaf in the area of people management. During the last fiscal, it rolled out the largest ever employee stock option scheme (ESOS).
All told, 14,000 employees, constituting roughly 29.1 per cent of the total employee strength, have become the company’s shareholders through this scheme.
The company granted 2.97 crore options to its employees in three tranches in 2007-08, according to the company’s annual report released last week.
This is one of a string of measures that the company has put in place to nurture talent in an organisation that’s facing a huge shortage of manpower to deal with its expansion plans.
The company, which is expanding in high-growth areas including retail and energy, is facing a job market where competition to retain people is becoming increasingly difficult. In early 2007, RIL subsidiary Reliance Retail had rolled out a series of measures to retain its top brass.Under the new plan, RIL is taking a complete re-look at its existing human resource (HR) processes.
Hewitt Associates, a US-based consultant, has been appointed to shape up the new HR strategies. Once Hewitt completes its work, new performance management guidelines and career opportunities will be put in place.“The main objective being to take a re-look at the existing processes and benchmark with the best in each area and work towards going beyond,” said the RIL annual report.
Another overseas consultant, The Hay Group has recently completed job evaluation exercise for employees at RIL’s petrochemicals business. This will shortly be extended to other divisions. The Hay Group’s mandate includes, among other things, restructuring of employee hierarchy.
Attempts are being made to create a talent pipeline. For the refinery, RIL has been training a total of 1,700 carpenters, fitters and plumbers in Jamnagar. “We recruit people for our construction team and train them on soft skills,” said a Reliance official familiar with the development, who requested anonymity as he is not authorised to speak to the press.
The company has also hired 1,500 engineering graduates to cater to demand for its expansion plans. For the first time, a business management trainee (BMT) scheme was launched in the last financial year. “This will be an on-going annual initiative,” the annual report stated.

An Indian cabbie was brutally beaten by two men in Adelaide who allegedly also stole his taxi in a second such incident in the past three weeks.

2008-05-19T09:39:00.000-07:00

NEW DELHI: TV viewers fed up with bad signal reception are set to get more choice, with Anil Ambani group company Reliance Communication on Sunday announcing the road map for launching competitively priced Direct-To-Home (DTH) services across 4,000 towns in the next few weeks.
The company has already completed trial runs across 2,400 towns and the service, under the brand name, Big TV DTH. The service is currently available for customers of other DTH operators for just Rs 1,000, compared to nearly Rs 4,000 being charged by existing DTH operators.
The company claims that as of April this year, it had a subscriber base of 40,000. Reliance, however, is offering the service at a monthly price of Rs 325, which includes Rs 100 worth free "pay per view" content, and is hoping to make a dent in the customer base of existing operators with aggressive pricing strategies.
Asked about the commercial launch of services, a spokesperson declined to comment, but said: "The DTH offering under the Big TV brand would be launched during the course of few weeks."

Mukesh Ambani's pay cheque is over Rs 44 cr

2008-05-19T09:35:00.000-07:00

NEW DELHI: Top business house Reliance Industries has given its chief Mukesh Ambani, the country's richest person and presumably top-paid executive, a hefty pay hike of about 45 per cent to take his annual remuneration to over USD10 million.
Mukesh Ambani, Chairman and Managing Director of Reliance Industries, got a total payout of Rs 44.02 crore in financial year 2007-08, marking an increase of about Rs 13.5 crore from the previous fiscal. In fiscal 2006-07, Ambani's annual remuneration had increased to Rs 30.46 crore, from Rs 24.77 crore previously.
However, a large part of Ambani's full-year pay cheque comes in the form of commissions that the company pays to select executives as a ratio of its net profits.
According to the company's annual report being sent to shareholders, Ambani got a salary of Rs 60 lakh (Rs 5 lakh per month) and another Rs 48 lakh (Rs 4 lakh per month) in the name of "perquisites and allowances".
In addition, he got Rs 18.75 lakh under the head of "retiral benefits" and Rs 4,275.44 lakh toward commission on net profit, taking his total to Rs 4,402.19 lakh for 2007-08. RIL Chief was the top-paid executive in fiscal 2006-07, followed by Madras Cement's Chairman and MD P R R Rajha, who had an annual payout of about Rs 24.8 crore.
However, Ambani, who was ranked as world's fifth richest by Forbes magazine earlier this year with a net worth of USD 43 billion, may not find a place even among the 200 most paid chiefs globally. In a separate list, Forbes named Oracle's CEO Larry Ellision at the top of 500 most paid CEOs in the US with a pay cheque of USD 192.9 million. A total 177 CEOs in the list had a salary of over USD 10 million. It is not yet clear whether Ambani would be highest paid executive in India for 2007-08, as most of the companies are yet to disclose the remuneration figures for that year.

Microsoft proposes alternative deal to Yahoo

2008-05-19T09:32:00.000-07:00

SEATTLE: Microsoft Corp said on Sunday it has proposed an alternative deal to Yahoo Inc, rather than a full acquisition, in a move that could save the web pioneer from fighting a proxy battle with financier Carl Icahn. "Microsoft is considering and has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo," the company said in a statement without clarifying what that alternative might be.
Microsoft emphasized it was not proposing to make a new bid to buy all of Yahoo, after recently being rebuffed, but could reconsider. Yahoo said in a statement later on Sunday that it continued to consider a number of strategic alternatives and was "open to pursuing any transaction which is in the best interest of our stockholders".
The company's board will "evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value," Yahoo said in a statement. It added that it had confirmed with Microsoft that it was not interested in "pursuing an acquisition of all of Yahoo at this time". Analysts were split on the benefits of an alternative scenario to a full-fledged takeover.
"I definitely think an alternative deal is better than a full a acquisition," said Toan Tran, analyst at Morningstar. "It is positive for both companies, because you are getting the benefits of a Yahoo acquisition without the negatives namely the integration risks." But Kim Caughey, a senior analyst at Fort Pitt Capital Group, said the market will probably send Yahoo shares higher while pushing down Microsoft shares when the market opens on Monday.
Caughey said a joint venture or minority investment with Yahoo could cause confusion about who was in charge. "Microsoft walking away from Yahoo was a total head fake," said Caughey. "Microsoft is a terrible poker player if it thought people were going to believe that the deal was dead." The New York Times reported that Microsoft and Yahoo may form a partnership or joint venture for search-related advertising to take on Google Inc, which dominates the search market with a share significantly larger than a combined Yahoo and Microsoft. For its part, Yahoo continues to talk with Google Inc about a search advertising partnership and a deal could come as early as this week, a source familiar with the talks said on Thursday.
The statement from Microsoft comes on the heels of a proxy campaign launched on Thursday by Icahn to replace Yahoo's board with directors who would reopen talks with Microsoft, saying Yahoo had acted irrationally in refusing the giant software company's $47.5 billion bid

Microsoft walked away from its pursuit of Yahoo two weeks ago after three months of negotiations when Yahoo's board rejected Microsoft's sweetened offer of $33 a share, saying the company was worth at least $37 a share. Meanwhile, Microsoft and Icahn have not held discussions about Yahoo, said another source close to the company.

A spokesman for Yahoo declined to comment and Icahn could not be reached for comment. In a letter to Icahn last week, Yahoo board Chairman Roy Bostock said a new board would not be in the best interests of Yahoo investors, adding that Yahoo would consider any deal from any party, including Microsoft, if it offered the company full value. Icahn, who has said he had accumulated 59 million shares and options in Yahoo, also has the support of Paulson & Co, a $30 billion hedge fund that has amassed a 3.4 percent stake in Yahoo, and other investors upset by the board's handling of negotiations with Microsoft. Microsoft had said it had moved on from Yahoo and remained committed to building an online advertising powerhouse to rival Google. Company executives had said in making a case for a Yahoo acquisition that buying the web company would be the fastest way to close the gap on Google.

In an e-mail to employees on Sunday, Kevin Johnson, president of Microsoft's platform and services division, said the company must strengthen its online business regardless of how talks with Yahoo turn out. "The fact is that we are not where we want to be in this business yet and we've been in this position longer than we'd all like," Johnson wrote in the e-mail.

Bilimoria plans Cobra Beer sale

2008-05-19T09:30:00.000-07:00

LONDON: Karan Bilimoria, prominent Indian- origin entrepreneur, is considering the sale of his multi-million pound Cobra Beer empire that he began from the back of his car in 1989. According to marketing documents prepared for financial institutions, the company's sale is expected within the next three years.
Cobra Beer has grown into a major company that has a significant market share in the UK as well as in India, in the last 18 months it has struck deals with nine regional brewers and has acquired a majority stake in another.
The documents identify companies: SABMiller, InBev, Molson Coors, Carlsberg and Anheuser-Busch as "obvious buyers" with others such as Heineken, Kirin and Indian-owned companies also "possible buyers".
The Sunday Telegraph today reported that Cobra is trying to secure £13 million from investors to help fund its rapid expansion in India.
Bilimoria said: "It's a very likely option that someone comes along and makes us an offer we cannot refuse. I am not saying I am definitely going to sell the company. What I am saying is that definitely within three years we will have to have a major event."
He pointed SABMiller's acquisition of Foster's Indian operations in 2006 as an indication of the interest that the leading international brewers have in the fast growing Indian market. Cobra is reported to be using investment bank N M Rothschild and City Capital Corporation, an advisory firm, to help it find new investment.
The company's revenue grew 34% last year. This year it expects 44.4 million pounds in sales and is aiming to touch 100 million pounds by 2009. Much of the company's growth is expected to come from India. Cobra sold 4.1 million cases of beer worldwide last year, with 23% of its sales in India. Bilimoria said to the newspaper that his King Cobra strong beer and milder Cobra Premium would double their Indian sales this year.
"As we continue to grow we are becoming more and more valuable, particularly because of growth in India," he said. "We are brewing in nine locations and we now own a brewer.
Our sales in India will have grown by 100% by July. We are growing very rapidly so it's becoming increasingly valuable to a large player in the Indian market or someone wanting to break into India." He added that a trade sale was not the only option open to Cobra. It will also consider a strategic partnership with an international drinks group or a flotation on a stock market, either in London or India.

Anil Ambani to fund Hollywood biggies

2008-05-19T09:28:00.000-07:00

CANNES: Bollywood has always gone places. Now it’s going to the very fount of global entertainment — Hollywood — with big money in tow.
Anil Ambani's Reliance Big Entertainment (RBE) has signed deals to provide development funds to eight leading creative forces in Hollywood. The deals, announced here on Sunday, include those with production houses like Nicolas Cage’s Saturn Productions, Jim Carrey’s JC 23 Entertainment, George Clooney’s Smokehouse Productions, Chris Columbus’s 1492 Pictures, Tom Hanks’s Playtone Productions, Brad Pitt’s Plan B Entertainment and Jay Roach’s Everyman Pictures. ( Watch: Anil Ambani signs Hollywood stars )
In layman’s language, this means that the company will provide for the creation of a development silo for each of the Hollywood A-listers. RBE chairman Amit Khanna said: "This initiative will yield up to 30 scripts in the next two years. We are confident that at least 10 of them will go into production during that period." The movies that will be made could initially amount to $1 billion. "There will be no creative interference," said advertising guru Prasoon Joshi, who is also in on the deal. When creative freedom is combined with the huge cache of funds that Reliance will pump in, Bollywood is set to become a very significant player in the west.

Trade through Nathu La reopens amid fresh border row

2008-05-19T09:22:00.000-07:00

Nathu La: Bilateral trade between India and China opened on Monday through the fabled Silk Road amid a fresh border row, with Beijing claiming a strip of land in Sikkim.
"Border trade was earlier scheduled to open on May 1 but was postponed after Beijing requested New Delhi to delay the start following landslides in the Tibet Autonomous Region," said Ujwal Gurung, Sikkim's director of industry and commerce.
"Formal trade for the current year began on Monday and would continue until Nov 30," Gurung said.
The reopening of bilateral trade comes at a time when Beijing has once again raked up a border row by claiming a narrow strip of land near village Gyangyong in northern Sikkim.
Chinese officials have apparently objected to stone cairns erected at the village by Indian soldiers.
India has told China it would not allow Chinese troops into the area and that it would mean a breach of the treaty between the neighbours to maintain peace along the border.
The two Asian giants in July 2006 reopened trade across the 15,000-ft Nathu La Pass, 52 km east of Sikkim's capital Gangtok, as part of a broader rapprochement. The move marked the first direct trade link between the nuclear-armed neighbours since a bitter border war in 1962.
Under an agreement reached between the two countries, trade takes place four days a week - Monday to Thursday - beginning May 1 each year and lasting until Nov 30 when snow makes the area impassable.
Although two-way trade was slow in the first two seasons, about 1,200 Chinese traders crossed the border separated by a rusty barbed wire marker to the bazaar of Sherathang, five kilometres below the pass on the Indian side.
About 700 Indian traders headed to the Renqinggang interim market in Tibet on the Chinese side, 16 km from the border.

Wipro brings all its consultants under one roof

2008-05-16T10:35:00.000-07:00

BANGALORE: Wipro Technologies, which recently did a top-level rejig of its organisational structure, has bunched its 1,500-odd technology and business consultants splintered across various domains and verticals under one separate umbrella. Wipro, which has been consolidating its consultant force over the past six months, is hoping to leverage on the vast resource pool in a more structured way and deploy their expertise across the bandwidth of the diversified enterprise. Consulting accounts for 4% of Wipro’s revenue. That is not likely to change significantly with this rejig. However, the new structure will have upsides in the way the company will package its offerings for strategic and deep engagements with its customers. The consulting practise will directly report to Girish Paranjpe, who was recently elevated as joint CEO. “Till now, consultants were deeply embedded in their own respective domains and businesses. The full power of what consulting could do was not completely visible even internally,” says Wipro executive vice-president (HR) Pratik Kumar. The bunching together has created a sizeable resource pool that will now be an active part of the company’s go-to-market strategy. Consultants will engage with client CEOs/CIOs and act as partners in enhancing productivity.
Just like with any consulting firm, these professionals will actually get to work with their own fraternity rather than being split in individual projects. Wipro consulting practise would cover the gamut of technology, business, process and quality. Apart from consulting, Wipro’s other practises include testing, BPO, infrastructure management and enterprise applications. “It is about creating an eco-system. They get the benefit of learning from peers and that is how consultants work. They are like partners who contribute to each other. Because it is a practise, it sells right across the organisation and they will get to see variety,” Mr Kumar says.

MindTree open offer for Aztecsoft to begin on June 27

2008-05-16T10:34:00.000-07:00

MUMBAI: IT services firm MindTree Consulting on Friday said its open offer to acquire an additional 20 per cent stake in Aztecsoft will now start on June 27. The open offer would close on July 16, the firm said in a filing to the Bombay Stock Exchange. Earlier, the company had said the offer would start on June 30 and end on July 21. The offer would be made to existing shareholders of Aztecsoft at Rs 80 per share. MindTree had said that it entered into a definitive agreement with the largest shareholder of Aztecsoft to acquire 32.57 per cent at Rs 80 per share. Post acquisition, MindTree would initiate the process of merging Aztecsoft into itself.

Panchvi fail and other Bollywood blog tales

2008-05-16T10:33:00.000-07:00

It's no longer about cold wars. The starry world of Bollywood is busy with caustic combats instead. So Aamir Khan writes a cheeky blog entry describing his smelly dog named Shahrukh while Amitabh Bachchan rates Shah Rukh Khan's new reality show as "Panchvi Fail". Bachchan goes on to compare Panchvi Pass's ratings with his own high-ranking KBC show. Salman Khan is brattish as usual, checking on Akshay Kumar's fee before naming his price. The gloves are off in Bollywood. While yesteryear stars Dilip Kumar and Raj Kapoor and other antagonists kept their mutual dislike private, today the bitching is out in the open. The change has perhaps to do with Bollywood's changing dynamics. Bachchan has reportedly been paid over Rs 100 crore for his blog, so dishing out controversy is part of the domain, quips an industry watcher. Aamir probably felt that Bachchan was stealing the limelight, so he posted a mischievous comment. Two months ago, Aamir had demoted SRK, calling him the Number 2 star of the industry. "Suddenly it's no longer a politically correct, diplomatic Bollywood," says a media observer. "Bachchan, who over the years has been the epitome of modesty and political correctness, has thrown caution to the winds, especially in his blog. The others seem to be following suit. One doesn't know whether this is for the better or worse."
Salman Khan, not given to something as literary as a blog, makes his views clear in more prosaic ways. He has been openly attacking actors like John Abraham and Vivek Oberoi and refuses to acknowledge their presence at public events. Khan's latest bete noire is Akshay Kumar, not because his girlfriend Katrina is more comfortable with Akshay than him but because Akshay charges more. Says an insider, "A corporate approached Salman with a project and quoted Akshay's price to him. The actor told the reps that he would charge at least Rs 5 crore more than that.” The media has a definite role to play in flaring up star wars-take, for instance, the recent reports of friction between Rajnikanth and Shah Rukh Khan over a film. "The media tried to rake up another controversy between Shah Rukh and Hrithik over the Krazzy 4 song-reports said that Rakesh Roshan was not promoting Shah Rukh's song and only focusing on Hrithik's number," says an observer, who adds that stars are certainly more aggressive these days. "It stems from a variety of factors," he says. "It's like a chain reaction-one unsavoury reference engenders a series of retorts and rejoinders. The combination of factors-a highly active media with a growing penchant for tabloidish reporting, an increasingly competitive stance, and high stakes-is probably responsible for this kind of situation. But it could just be a temporary phase." "There's been rivalry in the film industry from the days of Dilip Kumar and Raj Kapoor,” says an industry insider. "But all they did was not cross each other's path. They would not work together, and each one forbade his ‘regular' heroine from working with his rival." Bharathi Pradhan, a senior film journalist, says that even if stars of yesteryear spoke out, the media was not such a tremendous presence and there were no blogs. "What Aamir Khan has done is in bad taste,” she says. "He does not a sense of humour and should not have attempted it." Raj Grover, former production head of Sunil Dutt's company, agrees. "Though rivalry has always existed, I have never seen actors calling other names so openly. What Aamir has done is certainly in poor taste."

Income Tax Department sends notice to BCCI over IPL taxes

2008-05-16T10:29:00.000-07:00

NEW DELHI: The Income Tax Department sent notice to the Board of Control for Cricket in India (BCCI) asking for copies of agreements. The Income Tax department has asked for contract details of all Indian Premier League (IPL) players, as reported by a private news channel. According to reports, the IT-D wants to check whether TDS Tax Deduction at Source (TDS) was deducted at 11.3%. Earlier, the Central Board of Excise and Customs had asked its regional commissioners to examine all contracts the BCCI has entered on or behalf of the IPL with all corporate bodies who have either bid for teams or are providing services - from entertainment to broadcasting to advertising
Under the franchise model, a sponsor owning a team pays a stipulated fee to the BCCI to get ownership. The franchisees have to pay 10 per cent of the bid amount every year to BCCI, as a franchisee fee. With the auction fetching BCCI $723.59 million, BCCI will get $72.36 million each year.
So the BCCI gets liable to pay service tax under 'business auxiliary service.' Since players, too, are not playing for the country, their purchase fees would be liable to service tax again under BAS. Broadcasting rights to a consortium of Sony Television and Singapore-based World Sports Group for 10 years for over $1 billion and their sale of time slots for ads would also attract service tax under the broadcasting service. So would branding of stumps in DLF name, showing its logo on the sidescreen. Naming Pepsi as the IPL official drink for five years for a fee of $12.5 million would also mean that BCCI would have to pay service tax on it.

Reliance Big Entertainment to spend $1 bn on films

2008-05-16T10:27:00.000-07:00

CANNES: Reliance Big Entertainment, the media and entertainment arm of the $75 billion Reliance Anil Dhirubhai Ambani group, on Friday announced that it would spend $1 billion on the Indian film and entertainment business over the next 12-15 months. This is by far the biggest commitment made by an Indian entertainment company for show business. Amid the glitter and glamour at the 61st edition of the Cannes Film Festival at the French Riviera, Reliance BIG Entertainment also revealed that 69 films in nine languages would be ready for distribution over the next 18 months. Over a dozen films will be released this year. "India is uniquely positioned in the global economic order. We believe this is the right time to make this commitment of $1 billion for the film entertainment business," said Amit Khanna, chairman of Reliance Entertainment.
We believe we are creating 21st century's truly integrated media and entertainment company. Our $1 billion spend is bigger than the cumulative investments of all other Indian players put together in this space. We will continue our aggressive expansion plans in film exhibition and leverage synergies to our growing production and distribution pipeline." The Indian entertainment business is a $4 billion industry, growing at 18 percent annually. Reliance Big Entertainment will be working with the best of Indian directors including Vidhu Vinod Chopra, Farhan Akthar, Shyam Benegal, Shaji Karun, Sudhir Mishra, Rituparno Ghosh, M S Sathyu, Madhur Bhandarkar, Buddhadev Dasgupta, Girish Kasravalli and Amol Palekar. "We have one of the best creatively differentiated slate of movies," said Rajesh Sawhney, president of Reliance Entertainment. "Our biggest challenge is to get our content and distribution to work in harmony. We believe digital and home entertainment will be unique for our growth." Reliance Big Entertainment has appointed senior ad man and well known lyricist Prasoon Johsi as its advisor to evaluate scripts and products. "People love good cinema and hate bad cinema. Our whole idea is to create good cinema from Reliance," said Joshi. He will evaluate scripts received by Reliance from independent filmmakers. Ace filmmaker Vinod Chopra is excited to have formed a production partnership with BIG Entertainment. "This alliance will ensure that our films will reach every corner of the world and take Indian cinema to the next level," Chopra said. The first of the feature films under this deal is a mainstream English language film "Broken Horses" directed by Chopra. The second film is based on a classic Indian tale, to be directed by Ram Madhvani. Reliance also announced a strategic tie up with Excel Entertainment, run by Ritesh Sidhwani and Farhan Akthar. The six films covered under this alliance include Abhishek Kapoor's "Rock On", Zoya Akhthar's "Lucky by Chance", Farhan's "Voice of the Sky" and "Don II", Abhinay Deo's "7 Minutes" (working title) and Reema Kagti's "Accident Spot". "It is a noteworthy collaboration," said Sidhwani. Reliance Big Entertainment business arms include Big Motion Pictures, Adlabs Films, Big ND Studios, Big Animation, Big Music and Big Entertainment.
The company has also forayed into Big Broadcasting, Big 92.7 FM and Big DTH and IPTV. Its new media companies include Zapak (India's number on online gaming portal), Big Adda (social networking site), Jump Games (moble games) and Big Flix (movie rental and download service). Reliance Big Entertainment is set to open offices in Southeast Asia, the Middle East and Australia and also in major cities in India. The Reliance group, which also has 160 operating screens in India, is likely to increase the number to 400 screens by end-2009. Early this year, the group made its foray into the US film exhibition market with agreements to operate 250 screens covering 28 cities in the key markets in the east, mid west and west coast. The company has also entered into an agreement to acquire controlling stake in Lotus Five Star Cinemas and operate 51 screen exhibition chains in Malaysia.

Toyota considers new plant to make low-cost, small cars

2008-05-16T10:26:00.002-07:00

TOKYO: Toyota Motor Corp said on Wednesday it is considering building a new plant to make low-cost, small cars for emerging markets. The automaker, which has announced plans to open a small-car plant in India, is in the early stage of planning for a second factory in an emerging country, a company spokeswoman said on condition of anonymity, citing policy. Toyota has not decided details such as the location, production capacity and the timeline for the plant, she said. A media report said on Wednesday that Toyota is eyeing a factory in Brazil for a launch in 2011 for the fast-growing auto markets in South America. Toyota plans to invest tens of billions of yen (billions of dollars) in the plant, which would have a production capacity of about 150,000-200,000 units a year, the report said. The small sedan and hatchback models would be priced at around 1 million yen (US$9,540; euro6,170), the report said. Other top carmakers, including General Motors Corp of the US and Nissan Motor Co, are also working on cheap cars targeting India and other emerging markets. The Renault-Nissan French and Japanese auto alliance said Monday it's forming a joint venture with Bajaj Auto Ltd. of India to develop, make and sell an inexpensive car there with a starting price around US$2,500 (euro1,600).

M&M refuses to 'confirm or deny' Kinetic Motor buyout talks

2008-05-16T10:26:00.001-07:00

MUMBAI: Two-wheeler maker Kinetic Motor' shares on Wednesday soared nearly five per cent, the maximum permissible limit, amid reports about a possible buyout by Mahindras, even as the rumoured acquirer said it will not "confirm or deny" the talks about any such deal. The leading auto maker Mahindra & Mahindra (M&M), which makes both personal and commercial vehicles, said in a statement issued to the stock exchanges that it is not in a position to either confirm or deny any talks about acquiring Kinetic Motor. M&M said it examines various opportunities in different areas, from time to time on a continuing basis, but it is not practicable to comment upon every opportunity at every stage. The statement followed media reports that M&M is in talks to buy Kinetic Motor. "The company is not in a position to confirm or deny the veracity of the report given its policy of not commenting on speculative reports that emanates from such activity," the filing added. However, the share price of Kinetic Motor, which had fallen by over 12 per cent in the past one week, reacted positively to the reports and closed 4.9 per cent higher at its upper circuit limit for the day at Rs 27.95. However, the shares of M&M closed lower at Rs 656.15, down by 1.58 per cent from its previous close on the BSE. Brokers said any additional financial burden arising out of a possible buyout of Kinetic Motor weighed down on the sentiments for M&M shares, while expectations for a potential buyout offer propelled the stock of the two-wheeler maker

Hyundai plans to launch $3,500 car in India by 2012

2008-05-16T10:23:00.000-07:00

CHANDIGARH: Car maker Hyundai Motor India on Friday said it plans to roll out its low-cost car at $3,500 in India by 2012. "It will take at least 4 years to develop the car and we think we will be able to introduce this car by 2012 for Indian market," Hyundai Motor India Managing Director and CEO H S Lheem told reporters here today. However, he said that this car would not be competing against the Tata's Nano car. The low priced car is in the process of evolution stage at its research and development centre in Korea, he said. On being asked about raising prices of the cars due to rising input cost, he said the company was seriously considering to hike the prices, which is expected to be decided during next month. However, he refused to divulge any detail regarding the hike in the prices.
He said the company would introduce several new models during this year in Indian market which includes Santro LPG, Accent LPG and CNG and i20. On the export front, he said the company expects to export 2.12 lakh units during this year. The company is exporting four models in overseas markets which includes i10, Santro, Getz and Accent and its export is spread in 95 countries. The company today also announced the launch of its fifth regional office here which will cater to Jammu and Kashmir, Himachal Pradesh, Punjab, Chandigarh and Haryana. In this region, the company was expecting to sell 33,000 units this year against 20,300 units sold last year

Bharti Airtel eyes full takeover of MTN

2008-05-16T10:22:00.001-07:00

India's number one mobile operator Bharti Airtel's negotiations with South African telecom major MTN is now headed towards complete take-over by the former, media reports said.
Bharti's talks with South African mobile operator MTN Group Ltd are now centered on a full takeover by the Indian operator for a combination of cash and stock, The Wall Street Journal said quoting a person familiar with the situation.
"Bharti still wants majority control (a 51 per cent stake) but MTN prefers a full takeover which in South Africa can be portrayed as a merger of equals. Talks this week are focused on this (full takeover) and ways it could be done," Wall Street Journal said in a report posted online.
The person said Bharti was considering paying as much as USD 20 billion in cash, said the paper. Bharti on Tuesday said it was in talks with MTN to "combine the strengths of the two leading players from emerging markets, and is accordingly veering toward possible structures to achieve this objective".
Bharti Group Chairman Sunil Mittal is understood to have held talks with the South African telecom major MTN's top management in London on Wednesday to work out a broad scheme of arrangements for a possible merger between the two companies.
Mittal met MTN Chairman M C Ramaphosa, CEO P F Nhleko and single majority stakeholder Azim Mikati to put forward Bharti's proposals in which the Delhi-based company is said to have insisted on 'exclusivity agreement' with MTN.
An exclusivity agreement would bar MTN from sharing any information or arrangements for a merger with any other firm. Bharti management is also believed to have offered 168 rands a share to MTN shareholders, while the South African company wants a higher price.
It is also learnt that Bharti wants to offer 70 per cent stock and 30 per cent cash for a possible merger to the MTN shareholders, whereas the South African telecom firm has asked a higher price.

Tata Motors launches eco-friendly Indica model

2008-05-16T10:21:00.001-07:00

Mumbai, May 16 (IANS) Tata Motors Friday launched a new dual fuel, eco-friendly model of its Indica range of vehicles.
The new model, Indica V2 Xeta LPG, is equipped with a dual fuel (petrol and LPG) engine that will reduce carbon dioxide emissions by about 10 percent and has high fuel efficiency both in the city and on highways. Certified for BS III emission norms, it can be upgraded to comply with Euro-IV norms, the company announced here. The new model affords a smooth transition between the two fuel modes even when the vehicle is moving. The electronically-controlled gas multi-point fuel injection system provides significant safety, performance and emission related advantages. The Xeta LPG has been launched in two variants with five colour options. The GLE version is priced at Rs.327,000 (ex-showroom, Delhi) and the higher version, GLS, is at Rs.342,000 (ex-showroom, Delhi). Tata Motors notched revenues of $7.2 billion last year. Recently, the company successfully negotiated a deal to take over the coveted Jaguar and Land Rover brands of Ford Motors.

No new LPG connections: PSU oil firms

2008-05-16T10:19:00.000-07:00

New Delhi, May 16 (PTI) Faced with a whopping Rs 200,000 crore revenue loss on fuel sales this fiscal, state-run oil firms have decided not to issue new domestic LPG connections and fix quota for the existing customers so as to make ends meet within the existing collections. Marketing Directors of Indian Oil, Hindustan Petroleum and Bharat Petroleum in a joint petition to the Petroleum Ministry yesterday suggested cost cutting measures as their losses on sale of petrol, diesel, LPG and PDS kerosene mounted to over Rs 550 crore a day, a top official said.
Government's bar on oil firms to raise fuel prices despite cost of raw material (crude oil) doubling to over 120 dollars a barrel, is likely to see the three firms end the current year with a revenue loss of Rs 200,000 crore. Last year, the revenue loss was Rs 77,304.
50 crore. "Oil companies are borrowing Rs 3,500 crore per month to keep their operations.
Our borrowings (for the three firms) have reached Rs 65,000 crore. We have suggested measures that will at least limit the losses at existing levels," he said.
Stopping issuance of new LPG connections would help limit the Rs 305.90 per cylinder loss.
Besides, quota per family will be fixed and expansion of retail network put on hold. Other measures include stopping import of fuels like diesel, for which high international prices have to be paid.
Though the nation is short in LPG and diesel production this year, the companies have suggested managing demand within the existing production. The oil companies, who are owned by the government, will need approval of the ministry for the suggestions to come into effect.

Inflation surges to 7.83 percent, Chidambaram urges patience

2008-05-16T10:18:00.000-07:00

New Delhi, May 16 (IANS) India's annual inflation rate rose to a three-and-a-half-year high of 7.83 percent for the week ended May 3, up from 7.61 percent in the week before. Finance Minister P. Chidambaram admitted the development was 'worrying' but counselled patience.
The index for food products under the manufactured products list rose by 0.7 percent due to higher prices of khandsari, oil cakes, coconut oil and flour. However, prices of jaggery, rice bran oil, rape and mustard oil, cottonseed oil and others declined. The index comprising fuel, power, light and lubricants also rose by 0.8 percent, with the maximum rise in lignite, which surged by 16 percent, data released by Ministry of Commerce and Industry showed Friday. "These are difficult times. The movement from 7.61 percent to 7.83 percent is indeed worrying but amidst dark clouds there is a silver lining," Finance Minister P. Chidambaram said shortly after the data was released. "We reserve the rights to take administrative measures .. for the moment we simply have to be patient .. overall I am concerned but I think we should just continue to be patient," the minister said, adding that the impact of the reduction in steel and cement prices would gradually come into force and bring inflation down. He said the rise in overall inflation had been due to the rise in prices of lubricants and manufactured products that are linked to the rise in the price of crude oil. V. Raghuraman, principal adviser, Confederation of Indian Industry, told IANS: "We expect this (inflation) to moderate within the range of seven to six percent as the steps taken by the government to curtail prices come into effect." According to K.J.Joseph, a senior economist at the Centre for Development Studies in Thiruvananthapuram: "This situation has arisen because of the lower food stock at the global level. The centre has to go beyond economic measures and should focus on administrative measures and should tackle hoarding and other such activities. Here the state has a role to play and they should see that such things do not take place.' The rise in inflation, which has led to steep rises in prices of essential food items and commodities, has sent the government into a tizzy as it faces a chain of state elections this year and a national election by May 2009. India's industrial production growth in March also dropped to a six-year low of three percent. However, the rise in the wholesale price index had little effect on the financial markets that ended in the green Friday owing to a depreciating rupee. Six core sectors - crude oil, cement, electricity, coal, petroleum refinery products and finished steel - also showed a healthy growth of 9.6 percent in March, according to data released Thursday.

Otsuka Chemical launches new pharma plant in Rajasthan

2008-05-16T10:16:00.002-07:00

Jaipur, May 16 (IANS) Japan's Otsuka Chemical Friday announced the commencement of its Rs.1.5 billion pharma-based chemical unit manufacturing facility near here.
After the inauguration, Hiroyishi Tosa, managing director of the company, told reporters that with the commencement of the new manufacturing plant, advance Cephalosporin antibiotic intermediate also called GCLE, would now be available in the country and will not have to be imported. Indian pharmaceutical industry imports 80 percent of the GCLE, used in manufacturing of antibiotics and pain relief medicines. 'You can well imagine our stakes in India. We are the only company which manufactures GCLE,' said Tosa. Tosa said that the company was the exclusive supplier of the chemical and the new plant would ensure that their technology is not stolen and remains 'secret' with them. Indian pharma companies have been importing GCLE from Otsuka Chemicals at $115 per kg. 'The cost will remain the same for Indian pharma companies. But they will benefit from the import tax exemption. They will now start getting GCLE in India itself,' explained Tosa. The plant set up at Keshwana Rajput village in Jaipur will initially produce 500 tonnes of the pharma-chemical. 'We would later increase our plant's capacity,' said Tosa. This is for the first time that the Rajasthan government with the help of the Rajasthan State Industrial Development and Investment Corporation (RIICO) has been able to attract a foreign pharma-based chemical unit to the state.

India says RIM to resolve BlackBerry issue in 1 month

2008-05-16T10:16:00.001-07:00

NEW DELHI (Reuters) - Research in Motion has said it expects to resolve in a month Indian security concerns about its BlackBerry wireless e-mail device, India's telecoms minister said on Friday.
The government has held a series of meetings with RIM and mobile operators after security officials raised concerns that e-mails sent through BlackBerry devices could not be traced or intercepted.
"RIM has promised the government that they will come out with a solution in a month," minister Andimuthu Raja told reporters at an industry event.
In response to a question, Raja said Bharti Airtel Chairman Sunil Mittal had not sought government support in his talks for a stake in South Africa's MTN Group.
The minister also said the government was considering whether to allow foreign companies to bid at auctions for licences for third-generation services (3G) in consultation.
The telecoms regulator said last month the auctions should be restricted to existing telecoms service licence holders.

MTN's Nhleko, a soft-spoken dealmaker

2008-05-16T10:13:00.001-07:00

JOHANNESBURG (Reuters) - Phuthuma Nhleko, chief executive of South Africa's MTN, is one of the country's best-known black businessmen and may be eyeing the top position if his company ties up with Indian mobile operator Bharti Airtel.
Nhleko, a U.S.-educated civil engineer turned corporate financier and MTN's CEO since 2002, has been instrumental in growing the company into a group with more than 68 million subscribers and operations in 21 African countries and in the Middle East.
A successful deal between MTN and Bharti would create the world's six-largest with more than 130 million subscribers.
Talks between the two companies are, however, at an exploratory stage and a number of other parties interested in sub-Saharan Africa's biggest mobile phone operator have emerged since news of the discussions broke earlier this month.
Emirates Telecommunications said last week that it was evaluating a possible bid for MTN, and China Mobile, the world's biggest mobile carrier, has said it is interested in the South Africa market, but it has not yet bid.
If MTN and Bharti do eventually merge, analysts believe Nhleko would want to run the combined business.
"I am sure Phuthuma wouldn't want to disappear off the scene. I think he is still probably ambitious and wants to be involved and possible want to lead any combined group as CEO," said Rajay Ambekar, a portfolio manager at Cadiz African Harvest.
Media reports and analysts say Bharti may seek a merger or share swap with MTN to avoid a prolonged bidding war for the South African phone firm.
MTN, with a 290 billion rand ($38.36 billion) market capitalisation, operates in countries in east, central and west Africa such as Nigeria, Cameroon, Ghana, Zambia and Uganda.
Under Nhleko, it has also pushed into Iran, Yemen, Syria and Afghanistan as well as Cyprus. Given its penetration in many difficult markets and hefty market value, analysts believe Nhleko is unlikely to allow MTN to go cheaply.
And if Bharti Airtel or any suitor is prepared to pay a premium to buy a stake in MTN, Nhleko and his top five management team stand to make a bundle.
Nhleko and four other executive directors own 26 percent of Newshelf 664 -- a management and staff-owned vehicle -- which in turn owns 13.09 percent of MTN.
The directors' stake is valued at nearly 10 billion rand ($1.31 billion) and Nhleko's share is worth about 2.9 billion rand.
MEDIA-SHY
Nhleko is an astute dealmaker, and spearheaded MTN's acquisition of Investcom in 2006 -- the 11th biggest M&A deal in South Africa since 1991.
He has been instrumental in transforming MTN from the second-largest mobile group in South Africa into sub-Saharan Africa's top player, while the acquisition of Investcom brought a substantial presence in the Middle East.
Despite all the international growth, however, MTN remains number 2 in its home country, where Vodacom has more subscribers.
Before joining MTN, soft-spoken and media-shy Nhleko was a chief executive of Worldwide Africa Investment -- in which he is still a majority shareholder.
He established Worldwide Africa Investments after a stint in corporate finance at Standard Bank, where he sharpened his dealmaking skills.
Away from deals, Nhleko relaxes by reading and listening to avant garde jazz. He holds an MBA from Atlanta University and a civil engineering degree from Ohio State University.

Want to buy a term plan? Well, best of luck

2008-05-13T02:28:00.001-07:00

At 26, single and with a growing responsibility towards my family, I decided to insure myself. Great idea, agreed my financial planner, advising me to opt for a term plan. Reason? It's the cheapest form of insurance cover and moreover, I'd be able to reap the benefits of youth by paying a low premium for a high cover.
However, a trip to several insurance companies convinced me that while term covers may have takers, it's the sellers who are hard to come by. Almost all of them were bent on selling me - yes, only unit-linked insurance plans.
The reasons they gave were many. For instance, one insurance agent claimed that I would lose the entire amount. Another's contention was that Ulips always beat mutual funds in the long run. Here's what I came back with:
May 8, 2008, 5.30 p.m.: I am at an insurance company's office in Peninsula Chambers, Lower Parel, Mumbai. I ask the agent for a term plan saying I plan to go for a home loan and need insurance to cover the loan.
The agent asks my age, income and saving pattern. A bit of calculation on the computer and he says, "I think we have a better plan for you." The 'better plan' is a Ulip where I have to invest Rs 4,000 per month for a cover of Rs 750,000.
But I need a cover of Rs 20 lakh (Rs 2 million). So he suggests that if I increase the amount to Rs 5,000 per month, he will hike the sum assured by increasing the mortality charges. (The latter are costs that insurance companies charge to give life cover. For Ulips, which are a mix of investment and insurance, the premium is divided between the two, after deducting other costs such as, premium allocation and fund management.)
When I am not convinced, he shows me an illustration of how Ulips are even better than mutual funds in the long run and adds, "In the last one year, we have given returns of 60-70 per cent, better than any mutual fund."
But aren't term plans cheaper? He promptly says, "Yes, they are, but you should think about your future too." I tell him that I will speak to my financial advisor and get back.
Same day, an hour later: Next stop; another insurance company's office in Peninsula Chambers. Another investment advisor goes through the same ritual of taking down my age, income and saving pattern.
And then, suggests a premier product, another Ulip with the carrot, "This product has returned 167 per cent annually till January, 2008. Even now, the returns are quite high." When I insist on a term plan, he asks me to consider another product, a Ulip variant. Exasperated, I leave.
May 9, 1.30 p.m.: I am at an office at Kamala Mills, Lower Parel, to try out a large private insurer. Soon, there is another Excel sheet, churned out in a jiffy, with all my details.
The agent here promptly gave me the amount I would have to pay for the term plan, but it came with the caveat, "These are outdated products, Ulips give both insurance and investment benefits."
I explain to him that I am a regular investor in mutual funds. "Most of the money in mutual funds is from institutions and they trade in the market every day. These funds should only be looked at for short-term benefits," he advises.
When I ask him if the agent's costs can be reduced, he refuses to do so, but offers his services to make sure that my money will be in debt in volatile market conditions and moved to equities during an upswing � all this for no fee (Ulips, anyway, offer four free transfers between different kinds of funds a year).
On the higher cost of Ulips the reply was, "While the industry charges fund management and mortality fees of 25 per cent, we charge only 11 per cent."
In addition, after paying premium regularly for three years, I would be entitled to free gifts and discount coupons. After an hour, the final stop: The office of a large life insurer in Dadar(West).
The agent again starts with how term plans are dead investments. And a policy that gives returns should always be the criterion. After a lot of haggling, he agrees term plans are cheapest, but says I should purchase an investment-cum-insurance product along with it.
After putting in efforts to purchase a term plan, I realised that though no one was directly willing to say that they do not sell it, they queer the pitch for buyers by including returns, loss of money and other factors. And even after spending over an hour in each of these four offices, instead of a simple term policy form, all I heard and read about was Ulips.

A crorepati who lives in a hut!

2008-05-13T02:24:00.000-07:00

His story is an inspiration for millions. A self-made entrepreneur, his mission is to help the poor through job creation. E Sarathbabu hit the headlines after he rejected several high profile job offers from various MNCs after he passed out of IIM, Ahmedabad two years ago.
He instead started a catering business of his own, inspired by his mother who once sold idlis on the pavements of Chennai, worked as an ayah in an Anganvadi to educate him and his siblings. As a child, he also sold idlis in the slum where he lived. "We talk about India shining and India growing, but we should ensure that people do not die of hunger. We can be a developed country but we should not leave the poor people behind. I am worried for them because I know what hunger is and I still remember the days I was hungry," says Sarathbabu.
In August 2006, Sarathbabu's entrepreneurial dream came true with Foodking. He had no personal ambition but wanted to buy a house and a car for his mother. He has bought a car but is yet to buy a house for his mother. The "foodking" still lives in the same hut in Madipakkam in Chennai. Today, Foodking has six units and 200 employees, and the turnover of the company is Rs.32 lakh a month. But it has not been a bed of roses for Sarathbabu. After struggling and making losses in the first year, he managed a turnaround in 2007.
How has his experience as a 'Foodking' been in the last two years? Sarathbabu shares the trial and tribulations of an exciting and challenging job in an interview with Shobha Warrier.A tough beginning As I am a first generation entrepreneur, the first year was very challenging. I had a loan of Rs 20 lakh by the end of first year. I had no experience in handling people in business, and it was difficult to identify the right people. Though I made losses in the first year, not even once did I regret my decision of not accepting the offers from MNCs and starting an enterprise of my own. I looked at my losses as a learning experience. I was confident that I would be successful one day.

Sleeping on the railway platformApril 29, 2008
My first unit was at IIM, Ahmedabad. When we started our second unit in October 2006, I thought now I would start making money. But I made losses of around Rs 2000 a day. A first generation entrepreneur cannot afford such a loss. But I worked really hard, working till 3 a.m. in the morning. What reduced my losses were the birthday party offers.
I started the third unit again in Ahmedabad but it also made losses. All my units were cafeteria and I understood then that the small cafeterias do not work; I needed huge volumes to work. My friends who were extremely supportive in the first year when things were difficult for me. I had taken loans from my IIM-A friends. They were earning very well.
In December 2006, an IIM Ahmedabad alumni event took place in Mumbai and I decided to go there mainly to get a contract. I was hopeful of getting it. I also knew that if I got the huge contract, I would come out of all the losses I had been incurring.
I booked my train ticket from Ahmedabad to Mumbai for Rs 300 and I had Rs 200 in my hand. As the meet went on till late at night, I could reach the station only at midnight. I missed the train. I decided to sit on the platform till the morning and travel by the next train in the morning. I didn't have the money to check into a hotel. I didn't want to disturb any of my friends so late at night.
It was an unforgettable night as I was even shoved off by policemen from the platform. It was quite insulting and embarrassing. After two hours, people started moving in, I also went in.
A man who sat next to me on the platform gave me a newspaper so that I could sleep. I spread the newspaper and slept on the platform! I sleep well. I got my ticket refund in the morning and went back to Ahmedabad. And, luck did not favour me, I didn't get the contract.
In March 2007, I got an offer to start a unit at BITS, Pilani (Sarathbabu was an alumnus of BITS, Pilani). That was the first medium break for me. For the first time, I started making profits there though the other units continued to make losses. The reason for our success at BITS, Pilani was the volume; there were more students and there was a need for a unit like ours while in Ahmedabad, they have at least a hundred options.
If I made Rs 5000 a day at Ahmedabad in two shifts, here I made Rs 15,000 a day. BITS, Pilani unit gave me the confidence to move on. Unless you make money, you can't be confident in business.

What changed my fortune
April 29, 2008
When all my friends who worked for various MNCs made good money every month and I made losses with my venture. But I kept telling myself, I am moving in the right direction to reach my ambition and vision. My dream was to provide employment and I was doing just that. I continued to work till 3 a.m. but I never felt tired.
Through BITS, Pilani, I got the BITS, Goa contract and that was the biggest break for me. It was not a cafeteria like the earlier ones but the dining hall that we got. We had to feed 1300 students. We started our operations in July 2007. At Rs 50, for 1300 students, our sales was Rs 65,000 per day. We soon started making a profit of Rs 10 to 15,000 a day. Around 60 to 70 people work there. I gave the charge of the Ahmedabad operations to one of my managers and moved to Goa.
I was still in debt by Rs 15-20 lakhs but I knew BITS, Goa would keep my dream alive. Within six months of starting our operations in Goa, I repaid all my debt.
I was called to give a speech at the SRM Deemed University. After the speech, I asked the Chancellor, can you give me an opportunity to serve in your campus?? He said, "If not you, to whom will I give such an opportunity?" It's a food court but a big one, similar to the one at BITS, Pilani. There are around 17,000 students there.
Now, I have the BITS, Hyderabad contract, ready to start in July 2008. Other than the six units, I have approached a few more universities and corporate houses too. In the first year, I had made a loss of Rs 25 lakh. Right now, we have a turnover of Rs 32 lakh every month, which works out to 3.5 crore (Rs 35 million) a year.
I have hired about 200 people. Indirectly, we touch the lives of around 1000 people. By this year end, we will have 500 people working for us. Only 10% of my workers are educated, the rest are uneducated. I want to make a change in their lives. If they have any problem, I will take care of it. We support the marriages and education of poor families. We are paying more to the employees as the company is doing well. Now that the foundation is strong, I plan to have ten units and a turnover of Rs 20 crore (Rs 200 million) turnover by next year.

His advice: Never give up!
April 29, 2008
In the last two years, I have given more than 120 lectures in various institutions in India. When I got the first opportunity to speak, I thought God had given me an opportunity to encourage or inspire entrepreneurs. When youngsters tell me they are inspired, I feel good.
When you just dish out the theory, nobody believes you. But when you do it, they believe you. What I tell them is based on my own experiences.
When I thought of starting a company, I felt India needed 100 people like Narayana Murthy and Ambani. If 100 such people support 2 lakh people each, imagine how many Indians get supported.
Entrepreneurship is needed to uplift the poor. It is not easy to be an entrepreneur, especially a first generation entrepreneur.
There will be lots of challenges in the beginning but you should learn to look for the light at the end of the tunnel.
Never give up even if there are hurdles. There are many who give up within a week.
You need determination and a tough mind to cross the initial hurdles.
If you are starting without much money, you should not have any overhead expenses. He still lives in the same hut
As I am in the food business, I know how much the price of every food item has gone up. Many people will languish in poverty because of inflation. Had my mother been working as an Anganvadi ayah today and earning Rs 1500, she would not have been able to feed us and educate us.
On the one side, we talk about India shining and India growing, but we should ensure that people do not die of hunger. We can be a developed country but we should not leave the poor people behind. I am worried for them because I know what hunger is and I still remember the days I was hungry. That is why I feel it is our responsibility to take care of them.
I wanted to buy a car and a house for my mother. I bought a car first, not a house. I still live in the same house, the same hut. I can build a house right now but I want my business to grow a little more. I feel good in the hut; that?s where I get my energy, that's where I lived 25 years of my life. I want to remind myself that the money and fame should not take me away from what I want to achieve.
But within six months, I will build a good house for my mother. Her only advice to me is, don't waste money.
Till I was in the 10th, there was no electricity in my house. I had to sit near the kerosene lamp and concentrate hard. That's how I learnt to concentrate.
The two year journey has been very enriching. It seems like a 20-year journey for me. I was living every moment of the two years, from sleeping on the Mumbai railway station platform to this level.

FMPs turn unattractive for investors

2008-05-13T02:23:00.001-07:00

If you are planning to invest in Fixed Maturity Plans, think twice. Because most mutual fund managers believe that FMPs are unlikely to give higher returns as they did last year.
According to Mohit Verma, chief investment officer, debt, JM Financial [Get Quote] Mutual Fund, "None of the FMP schemes started this year has offered returns of over 10 per cent."
And, this is beginning to show in their collections as well. In March 2007, FMPs had collected Rs 30,869 crore (Rs 308.69 billion). In March 2008, they attracted only Rs 21,688 crore (Rs 216.88 billion).
Even in April this year, 62 schemes collected only Rs 1,126 crore (Rs 11.26 billion), compared to Rs 10,873 crore (Rs 108.73 billion) raised by 55 schemes in April 2007.
Last year was an exceptional one for FMPs as they offered over 12 per cent (post-tax returns of 10-10.25 per cent) returns to the investors. This was because short-term yields were quite high.
"Buoyed by this, many investors are expecting that this year also there will be products that will give higher returns. But it does not seem likely in the near-term," added Verma.
Another reason why FMPs were doing well was that many of these schemes were investing in high-yielding corporate bonds being offered by real estate companies.
However, this year FMPs have become more risk-averse. They are staying away from such bonds offered by real estate companies and non-banking financial companies for the fear of default.
FMPs are close-ended debt products that invest in corporate and government bonds, money markets and fixed deposits with banks.
Though not guaranteed, the returns in these products can be predicted. FMPs invest in instruments that have a pre-determined yield at the time of maturity. The scheme tenure is pre-specified.
These schemes also offer tax benefits. If one invests in an FMP for over a year, there are double indexation benefits.
For instance, if an FMP is bought in May 2008 and is to be matured in June 2009, the investor will get inflation index benefit for two years. One for 2007-08 as the money was invested in that year, and the other for 2009-10.
Ramkumar K, Senior Vice-President and Head, Fixed Income, Sundaram BNP Paribas, said, "FMPs, being close-ended schemes, longer duration too adds to their unattractiveness. At present, about 40 per cent of the schemes are long-term (over one year) to take advantage of the double indexation benefits."

5 popular small savings schemes

2008-05-13T02:18:00.000-07:00

In times when investors' attention is hogged by market-linked avenues like mutual funds and ULIPs, small savings schemes have become a forgotten breed.
Alongside fixed deposits, small savings schemes (also referred to as post office schemes) would classify as the most conventional investment avenues.
Assured returns and a sovereign guarantee (read the highest degree of safety) are the hallmarks of small savings schemes. And these traits appeal to risk-averse investors in no small measure.
Even for risk-taking investors, holding a portion of their investment portfolios in assured return schemes is vital from an asset allocation perspective.
Small savings schemes, in turn, would classify as the most comprehensive pool of assured return schemes.
In this note, we study the investment proposition offered by five popular small savings schemes.
Public Provident Fund
Investments in Public Provident Fund are recurring in nature and run over a 15-yr period. Annual contributions are mandatory to keep the PPF account active. The minimum and maximum investment amounts are pegged at Rs 500 pa and Rs 70,000 pa respectively.
Only contributions of upto Rs 70,000 pa are eligible for tax benefits under Section 80C. Any amount invested over the aforementioned is returned without interest.
At present, PPF investments yield a return of 8.0% pa. However, it should be noted that the returns are assured but not fixed. This is because the rate of return is subject to revision i.e. it can be revised upwards or downwards thereby impacting the returns.
Liquidity
With no provision for a regular interest payout, PPF fares rather poorly on the liquidity front. Withdrawals can be made only from the seventh financial year. Furthermore, the amount that can be withdrawn depends on the balance in the PPF account in the earlier years.
Taxation
Apart from Section 80C tax benefits on the amount invested, interest income from PPF investments is exempt from tax under Section 10(11) of the Income Tax Act.
Apt for...
Given that investments in PPF run over a 15-yr period and that annual contributions are mandatory, it is an ideal avenue to build a corpus for long-term needs like retirement and children's education. It will appeal to investors who accord higher priority to returns over liquidity.
National Savings Certificate
Investing in National Savings Certificate (NSC) entails making a lump sum investment for a 6-Yr period. While the minimum investment amount is Rs 100, there is no upper limit. Presently, investments in NSC earn a return of 8.0 per cent pa, compounded on a half-yearly basis.
In other words, Rs 100 invested will grow to approximately Rs 160 on maturity. Unlike PPF, the rate of return in NSC is locked in while investing; as a result, the investments are indifferent to any subsequent change in rates.
Liquidity
NSC scores poorly on the liquidity front. Interest income is received on maturity. Also, premature withdrawals are permitted only in specific circumstances like death of the holder, forfeiture by the pledgee or under court?s order.
Taxation
Investments of upto Rs 100,000 pa are eligible for tax benefits under Section 80C. Furthermore, the interest accruing annually is deemed to be reinvested, hence it qualifies for deduction under Section 80C. However, the interest income is chargeable to tax.
Apt for...
Given its nature (lump sum investments), NSC is best suited for gainfully investing one-time surpluses and to provide for needs that will arise over a corresponding (6-yr) timeframe. It will be apt for investors seeking returns over liquidity.
Post Office Monthly Income Scheme
As the name suggests, Post Office Monthly Income Scheme (POMIS) generates a monthly income for investors. The minimum investment amount is Rs 1,500; conversely, the maximum amounts have been pegged at Rs 450,000 and Rs 900,000 in case of single and joint accounts respectively.
Investments in POMIS earn a return of 8.0 per cent pa and the investment timeframe is 6 years. On maturity, investors are eligible to receive a 5.0% bonus on the original sum invested.
Liquidity
With a monthly interest payout, POMIS fares better than all its peers on the liquidity front. Premature withdrawals are permitted after completion of 1 year from the date of making the investment.
If the premature withdrawal is made after 1 year but before 3 years, then 2.0 per cent of the initial amount invested is deducted as a penalty. Similarly, a premature withdrawal on or after 3 years, attracts a penalty of 1.0 per cent of the initial amount invested.
Taxation
Investments in POMIS are not eligible for any tax benefits. Also, the interest income is chargeable to tax.
Apt for...
POMIS is suited for investors like retirees and senior citizens who seek assured and regular income.
Post Office Time Deposits
Post Office Time Deposits are fixed deposits from the small savings segment. While investors can opt for 1-yr, 2-yr, 3-yr and 5-yr POTDs, only the 5-yr ones are eligible for tax benefits under Section 80C.
A 5-yr POTD earns a return of 7.5 per cent pa; the interest is calculated quarterly and paid annually. In other words, Rs 10,000 invested in a 5-Yr POTD will deliver an interest income of approximately Rs 771 pa. The minimum investment amount is Rs 200, while there is no upper limit.
Liquidity
POTDs fare favourably on the liquidity front, thanks to the annual interest payouts. Premature withdrawals are permitted after 6 months from the date of deposit; however, the same entails bearing a penalty in the form of loss of interest. Finally, any excess interest paid is recovered from the principal amount and the interest payable.
Taxation
Investments of upto Rs 100,000 pa are eligible for tax benefits under Section 80C. The interest income is chargeable to tax.
Apt for...
The 5-yr POTD can be utilised for generating an annual and risk-free income, alongside making a tax-saving investment
Senior Citizens Savings Scheme
Unlike the other avenues that we have discussed so far, Senior Citizens Savings Scheme (SCSS) is open only to a section of the investor community i.e. senior citizens.
Individuals who are 60 years of age and above can invest in the scheme; those who have attained 55 years of age and have retired under a voluntary retirement scheme can also participate in the scheme, subject to certain conditions being fulfilled.
The minimum and maximum investment amounts are Rs 1,000 and Rs 1,500,000 respectively. Investments in SCSS run over a 5-yr period and earn a return of 9.0% pa.
Liquidity
Given that SCSS is targeted at senior citizens, the liquidity aspect has been adequately addressed; interest payouts are made on a quarterly basis i.e. on March 31, June 30, September 30 and December 31, every year.
Premature withdrawals are permitted after the expiry of 1 year from the date of opening of the account. In case of withdrawals made after 1 year but before the completion of 2 years, an amount equal to 1.5 per cent of the initial amount invested is deducted. In case of withdrawals made on or after the expiry of 2 years, an amount equal to 1.0% of the initial amount is deducted.
Taxation
Investments in SCSS are eligible for tax benefits under Section 80C. The interest income is chargeable to tax and subject to tax deduction at source as well. Investors whose tax liability on the estimated income for the financial year is nil, can avoid TDS by furnishing a declaration in Form 15-H or Form 15-G as applicable.
Apt for...
Expectedly, SCSS is meant for senior citizens who wish to receive an assured income at regular time intervals. The tax benefits only add to the allure of the scheme.

Beware! Tight money days ahead

2008-05-13T02:17:00.002-07:00

Two days ago, I got talking to the head of a foreign bank in India. I asked him, inevitably, how he was currently viewing the whole sub-prime meltdown. The question partly stemmed from the fact that just a week before, Swiss banking giant UBS had announced a first quarter loss of $10.5 billion. To add to the over $320 billion already written down the world over.
According to him, the problems were known and the recapitalisation efforts had started so to that extent the situation was under control. However, on the other hand, the bad news he said was that the bottom was yet to be found.
Banks like HSBC (which said it would make a $4.6 billion provision for bad debts on Monday) too are saying that a recovery in the US housing market is unclear and a comeback, if any, can be expected only in 2009. A late 2009 recovery seems to be the consensus now.
Meanwhile, risk aversion is becoming higher all over. "Bank A will not lend to Bank B and that creates a liquidity problem as well," the banker said pointing to the Bear Stearns collapse, where the Federal Reserve had to step in to bail it out by providing emergency loans.
After Bear Stearns, most banks globally were more wary, he said. How would all this impact India? According to him, what the sub-prime crisis had clearly done was to force all banks to carefully relook all their international operations.
The relook, he predicted, would result in several banks recasting, downsizing or selling off pieces of their operations or investments. Actually, this has already begun to happen.
The problem, it turns out, will not just be with foreign banks with operations in India. Many bankers I have spoken to in recent days say the same recklessness in disbursing loans that partly triggered the mortgage market crisis in the US has been visible in India, though obviously not at the same scale.
For instance, there are several cases where individuals have used credit cards from some banks - given out on somewhat weak documentation - to get loans and access to other financial products from the newer and aggressive finance companies.
As it happens, one bank typically gets blamed here but my sense is the competitive forces have caused all credit card issuing banks to behave similarly. It's not that this was not known all this while, it's just that the sub-prime crisis puts it in context.
All this, as I understand it, is coming to roost. While there is no credit blowout being predicted at this moment, the banks themselves are realising the need to tighten the screws, at least in some cases. It appears at this moment that some of the foreign banks who have been active in the retail space will lead the effort but Indian banks will not be too far behind.
Which should be good news. Unfortunately, it comes at a somewhat bad time. Because this is the way it's going to play out. First, banks with a somewhat larger retail spread will (actually they already have in some cases) start weeding out the low-margin, low-volume customers.
This could mean that those at the bottom of the pyramid will find it difficult to leap onto the consumption bandwagon as they were, or hoping to, in the last few years. The weeding out moves could extend to savings bank accounts in the case of some banks.
Second, it would mean that smaller enterprises who are already fighting a losing battle on various fronts will see credit tightening. The banker I spoke to tells me this is already happening. "You see the big companies and their large balance sheets and think this is a blip on the growth curve. That's true but what you don't see in the headlines are the stories of the smaller companies who will start fighting for survival."
So a smaller company has to reckon with tighter credit, higher interest rates and of course massive inflationary pressures on everything from raw material prices to people. Add to the fact that your bank may be telling you that it may either not lend to you or reduce the quantum and you are in somewhat difficult times.
As an individual or an enterprise who has just about starting getting access to credit, you might be forced back to the informal market. The banks themselves will fight this through.
Interestingly, once again the industry is buzzing with predictions on which bank with a recent retail thrust would call it quits, either because of domestic or international pressures.
The fact is that one or two will put up their hands in surrender is almost a foregone conclusion. But on the institutional side, business continues to be strong. The big companies continue to grow, albeit a little slowly and Deal Street is still buzzing.
So some parts of the consumption economy could be in for a slowdown, if that is not evident already. The latest Index of Industrial Production has fallen substantially, from 14.8 per cent in March 2007 to just 3 per cent for March 2008. This may be an aberration, maybe not. But one reason is tightening credit.
We were speaking about bankers and finances, though. My conversation with the bankers leads me to conclude they are focused on two factors. First, when the current global and domestic economic cycle will play out in its entirety and, second, who will replace Y V Reddy when he retires as the Reserve Bank governor on October 1. Some are also hoping he gets an extension.

Tata may export Nano to US

2008-05-13T02:17:00.001-07:00

Tata Motors [Get Quote] said on Tuesday it will consider exporting the Rs 100,000-car to many promising markets, including the US.
"There is nothing that we can not export Nano to any country. Tata Motors also has plans for exports. But the Tata Nano will be initially marketed in India," Tata Motors spokesperson told PTI.
The announcement comes close on the heels of the US publication Conde Nast Portfolio's report that 'Nano' would not be sold in the US.
"The model (Nano) won't be sold in the US but has the potential to radically alter the market for manufacturers in India. Tata-inspired followers are already revving up their engines," Conde Nast Portfolio said while naming Ratan Tata as one of the 73 biggest brains around the world.
The spokesman, however, said that after positioning firm in the domestic market, the company would consider exporting the car.
"The company has not yet finalised specific exports markets and timelines. The Nano will meet the prevalent norms of any country it is marketed in," the spokesperson said without mentioning any specific country, including the US.
Tata Motors usually does not export any of its products in the first few years of launch, he added.
The list of '73 Biggest Brains in Business', compiled by Conde Nast Portfolio, featured Tata for his $-2,500 car Nano, along with the likes of media mogul Rupert Murdoch and chief executive of investment bank Goldman Sachs Lloyd Blankfein.
Tata Group, which recently snapped up British luxury brands Jaguar and Land Rover for a $2.3 billion deal, had unveiled the world's cheapest car Nano during the Delhi Auto Expo this year and roll out is due in the second half of this year.
To compete with Nano, Bajaj Auto Ltd [Get Quote], the country's second largest two-wheeler maker, yesterday announced a joint venture with Renault-Nissan to produce a $-2,500 car. The 'ULC' code-named car, which would be rolled out from a brand new plant in Chakan (Maharashtra), would be available in the Indian market by 2011.
In recent times, the Indian auto market has caught the fancy of many global players too. US car maker General Motors had announced it would introduce a small car in India by 2010, which would be priced below its existing vehicle in the segment Spark.
Last month, Japanese major Toyota announced a Rs 1,400 crore (Rs 14 billion) investment in its Chennai plant to launch a 'strategic small car' within next 2-3 years.

ArcelorMittal steel group sells off US steel mill

2008-05-11T05:41:00.001-07:00

Paris, May 11 (ANI): The world's largest steel group ArcelorMittal has said that it has finalised the 810 million dollars sale of a plant in the United States to Russian Steelmaker Severstal.
It was ordered to dispose of the Sparrows Point plant in Baltimore, Maryland, by US authorities as a condition for their clearance of Mittal Steel's acquisition of Arcelor last year.
A deal to sell Sparrows Point to US companies Esmark and Whelling-Pittsburgh failed at the end of last year when financing fell through.
ArcelorMittal has lodged a complaint with the New York state Supreme Court, seeking more than 540 million dollars in compensation over an August 2007 agreement to sell for 1.35 billion dollars. (ANI)

Vodafone spokesman says not persuing MTN bid

2008-05-11T05:39:00.000-07:00

LONDON (Reuters) - Vodafone Group, the world's largest mobile phone group by revenue, has no intention of pursuing a bid for the South African company MTN, a spokesman said on Sunday.
Reports in Britain's Sunday Telegraph and Sunday Times newspapers said Vodafone was considering making a bid for part or all of MTN which could cost around 20 billion pounds ($39.02 billion).
"We have no intention of pursuing a bid for MTN," a spokesman said.
The two papers said Vodafone's interest had been triggered by India's top mobile operator Bharti Airtel which said last week it was in exploratory talks with MTN that may or may not lead to a deal.

Looking for consumer durable loans? Think again!

2008-05-11T05:35:00.000-07:00

The heat is on. Not only is the soaring summer mercury making our life miserable but even banks seem to be turning the heat on you.
For now onwards you will not be able to get the bank finance to buy your favourite gadget or consumer durables as they are choosing to stay away from the unsecured lending market, courtesy rising instances of defaults and recovery woes.
So if you were planning to buy an air conditioner or a refrigerator to beat the heat, you are about to feel the heat even more. Not only have the consumer durable manufacturers increased the cost of air conditioners and refrigerators, but also banks have refused to give out loans to buy consumer durables.
ICICI Bank [Get Quote], India's largest retail bank, is in the process of closing down its retail service finance or consumer loans division. This move comes soon after GE-Money and CitiFinancial -- two of the most aggressive firms in the segment -- stopped consumer durable financing. We at apnaloan.com tried to reach out to ICICI Bank for their comments on this development but were unable to reach them.
So what is turning the heat on these lenders who till only yesterday were more than eager to woo you? For one the cost of operations in the consumer durable loan business is very high because of the small tenure, small ticket size and small margin of profit. An increase in the number of defaults is only adding fuel to the already burning fire.
But don't banks lose out on potential borrowers? May be!
Credit card balance transfer: Is it really attractive?
Apparently, the move is aimed at promoting credit cards. Bankers feel it is easier to keep track of a borrower through the credit card. Also using credit card to pay a loan means a bank saves on processing cheques and it is also easier to recover the money lent for such purchases.
So what is the way out for those looking for credit to buy a consumer durable? Go looking for a merchant equated monthly installment (EMI) scheme between a bank and a product maker/seller. In these schemes, the price of the product is split in zero per cent EMIs across 6 months to 1 year.
If there is no merchant EMI scheme for the product and no consumer durable loan is available either, then the other option is to take a personal loan on your credit card. Like in most credit cards, these personal loans also have a free credit period of around 45-50 days. After that the repayment EMIs start. The rate of interest charged on the loan is built into the EMI.
The individual should keep in mind that late payment on these loans invites rates of interests similar to those on credit cards. This interest can vary anywhere from 40-45 per cent. This interest charged will be over and above the interest charged for the personal loan.
Getting unsolicited credit card offers? Here's help
In comparison, most consumer durable loans used to charge an interest of around 20 per cent. Also prepaying these loans involves paying a prepayment charge of 2-3 per cent on the principal outstanding amount.
But considering the current scenario we find that there are few people who do own a credit card, and now banks will diversify their force to strengthen their credit card spread. So that they are able to take more and more people under their fold.
So beat the heat by exercising other options

GE Money finds few takers for its loan portfolio

2008-05-10T19:58:00.000-07:00

MUMBAI: GE Money India is learnt to have found no takers for its wholly-owned personal loans and mortgages portfolios, with the interested parties quoting nearly half of the company’s expectation. The bidders say this could eventually lead to the proposed divestment plan being scrapped.
Sources close to the development said the bidders recently informed Morgan Stanley, advisor to GE Money India, that their valuations are in the range of $150-200 million. GE Money had pegged the base price of these two businesses at $400 million — the amount it had invested in them — and was looking for a premium over this.
They said the businesses, which are on the block, lost their charm in the aftermath of the US subprime crisis and subsequent depreciation of personal loan and mortgage portfolios across the globe. Portfolio quality has deteriorated for most players in India, with regulators clamping down on the aggressive methods of collection agents. Experts said the situation is unlikely to look better in a year or so.
“Under the changed scenario, the attraction for GE’s businesses could be their network. But we did not find merit in quoting more than $200 million for the network which we can built across the country in a year or so,” said a source close to one of the bidders. It has 180 offices in 120 towns, with 450 full-time employees and 2,600 contingent staff.
Another source said: “We are not very confident about quoting anything near to GE’s expectation as we believe delinquencies in most retail businesses in India are going up, with GE being no exception. In fact, that’s why big banks are slowly withdrawing themselves from the personal business.”
When contacted, the spokesperson for GE Money India told ET: “As mentioned in the past, we have received strong expressions of interest for a likely partnership for our wholly-owned personal loans and mortgages portfolios. The process of review is still underway and hence we will not be able to respond to speculations. GE Money remains steadfastly committed to India as a market for long-term growth.”
Code-named ‘Project Intrepid’, GE has put GE Money Housing Finance (excluding home loans distributed through a JV with Wizard Home Loans) and the personal loans business known as GE Money Financial Services on the block four months ago.
Nearly 40 companies showed initial interest, but a few firms including Tata Capital, Future Group, Indiabulls, the Aditya Birla Group and Carlyle carried out the due diligence. Reliance Capital had pulled out of the race citing ‘high asking price’.
GE Money India has a strategic arrangement with Australia-based Wizard Home Loans, a subsidiary of GE Money Worldwide. This strategic tie-up was announced in September 2007. Company officials had talked of a $200-million equity investment and of building $2-billion home loan portfolio by 2011.

Thanks to inflation, you are losing money on FDs

2008-05-10T19:55:00.000-07:00

NEW DELHI: Inflation is no longer just eating into your pocket by way of higher grocery bills. It's also eroding the money you've safely put away in a fixed deposit in your bank or post office.
That's because at 7.61%, it is more than enough to offset your interest earnings, giving you negative real returns. Most banks offer interest in the range of 8% to 8.75% on fixed deposits of tenures ranging from one year to 10 years.
The country's largest bank, SBI, for instance, offers 8.5% on deposits of two years or more, while for shorter duration deposits, it gives 8.75%.
That may seem like it still gives you some positive real return after accounting for inflation, but that's an illusion for most.
This is because the interest income is taxable, even if your deposit is covered by Section 80C of the Income Tax Act.
If your annual income is above Rs 5 lakh, the tax deduction would be at 30.9% (including education cess), which means the effective interest income comes down to 6.05% if the nominal rate is 8.75% and to 5.87% if the rate is 8.5%. In either case, the current level of inflation more than wipes out this return.
Even if your income is lower, between Rs 2.5 lakh and Rs 5 lakh per annum, where the tax rate applicable is 20.6%, the effective interest rate would be between 6.75% and 6.95%, again not enough to give you a positive real return on your deposit.
Real estate and gold, which typically appreciate fast in inflationary periods, are possible options that are relatively risk-free.
Equity could be another option, but that requires a different kind of risk appetite and more in-depth knowledge of the market.
With an annual income below Rs 2.5 lakh current levels of bank deposit rates and inflation give you a marginal positive real return.
With a tax rate of 10.3%, your effective interest earnings on deposits would be between 7.62% and 7.85%, barely allowing you to keep your nose above water.

Is it time to invest in property?

2008-05-10T19:53:00.000-07:00

Inflation is at high levels. Hence, returns on fixed income instruments like bonds and fixed deposits have lost their glitter. So, where does the salaried class invest the surplus it saves?
Investments in real estate are considered safe and rewarding. It is seen as an effective hedge against inflation. With inflation uncertainties looming large and house rents crawling upwards, it is time you owned a roof over your head.
For the past few years, home loan rates were constantly inching northwards. Adding to the woes were the increase in steel and cement prices, increasing the construction costs. But indicators are rife that things are set to change for the good. Some banks have already cut their rates and other have introduced lower rates for new borrowers. Coming back to the initial query, is it time to invest in property?
Banks vie with each other to lure in maximum customers. This is because home loan borrowers seldom default on their monthly commitments. Flexible repayment options, and lucrative loan packages, make the loans appear affordable. With cost of renting a house going up in the cities, it makes more sense to invest in a property and pay EMIs towards it. If you've a stable regular income and a good credit history, securing a home loan might not be a difficult task.
Perhaps the one big reason for the salaried class to apply for a home loan is the attractive tax sops. Let's understand the tax benefits associated with home loans. The amount of EMI outflow is directly dependent on principal amount, rate of interest and loan tenure. The greater the loan amount, the greater the EMI towards the loan. EMI can be broken into two components - the principal component and the interest component. During the initial years of the loan tenure, the equated monthly installments would have a higher share of interest component. However, towards the end of the tenure the principal component will be high.
The principal repayment that borrowers make on their home loan is eligible for income deduction under Section 80C of the Income Tax Act. The limit under Section 80C is Rs 1 lakh.
Under Section 24 of the Income Tax Act, the maximum amount of interest that can be deducted from your taxable income is Rs 1.5 lakhs. As a result, your taxable income decreases by that amount. This limit is for selfoccupied property only. Homeowners who invest in a second house can claim benefits for interest repayment of the home loan. There is no limit on the interest repaid unlike the Rs 1.5 lakhs limit under Section 24 for self-occupied property.

Higher disposable income means higher home loan

2008-05-10T19:50:00.000-07:00

In order to be eligible for a housing loan, a number of factors are taken into account. Primary among them is the income of the borrower. Apart from income, the age, number of dependants, qualifications, assets and liabilities, stability and continuity of employment /business, past repayment record etc are also considered to assess the repayment capacity of the borrower.
There are a few ways to enhance your loan eligibility. The banks recognise some additional sources of income and club them with your income, thereby enhancing the eligibility for the loan.
In the case of a salaried person, if he has some additional sources of income, they may be considered by the bank. The pre-condition is that the source of income should be somewhat regular in nature.
In case the spouse has an income, he/she should be a co-applicant. The additional income of the spouse will be included to enhance the applicant's loan eligibility. In case there are any co-owners they must necessarily be co-applicants.
If an individual is staying with his parents, the income of the parents may be clubbed subject to certain conditions. Some banks allow inclusion of the fiancee's income for sanctioning the loan along with the applicant's income. However, the catch is that the disbursement of the loan is done only after the applicant submits proof of his marriage.
In some cases, if the applicant can provide additional security, he may have his loan eligibility enhanced. The additional security may include instruments like bonds, National Savings Certificates, fixed deposits and LIC policies. Normally, an investment in shares is not considered for this purpose.
In case the applicant had taken a loan from a bank in the recent past, the bank also considers the repayment record of the individual. A good repayment record also enhances the eligibility of the loan amount.
Many banks waive off the requirement of having a guarantor. However, if one can provide a good guarantor, it may enhance the applicant's credibility with the bank and thereby enhance the eligibility for the loan.
The final amount to be sanctioned will depend on the repayment capacity of the individual. Of course, this appraisal only sets the maximum limit which the individual can get as a loan.
The amount that an applicant will be ultimately entitled to will have to conform within the limits fixed for each category of loan. While deciding on what incomes can be included in the eligibility criteria, the bank would consider the certainty of these additional incomes and may include certain margin requirements as well - for example, 50 per cent of salary of spouse or 40 per cent of value of investments may only be eligible. The full amount of the additional income may not be considered. Also, the bank would take into account the additional expenses which may be incurred in earning the additional incomes.

Realty does reality check, prices fall 15-20% in Q

2008-05-10T19:47:00.000-07:00

NEW DELHI: If high prices have been holding you from buying your dream house all these years, here’s something to cheer about. In the first quarter of this year, there has been a 15-20% price correction in markets across the country, especially in the residential segment.
In fact, in many markets, the level of transactions have gone down drastically, which has resulted in this dip. This is also because residential capital values in some micro markets in the metros have shown a negative growth in the last one quarter.
After tracking capital values in metros such as Mumbai, Chennai, Bangalore as well as Pune and the National Capital Region (NCR), the result was that either there has been a fall in prices of residential values or they have not increased in the last three months. In fact, places like Gurgaon have seen a dip of 15%, while the plot rates have come down by 20% in Noida. In Greater Noida, the plots which were selling at Rs 55,000-60,000 are now available for Rs 40,000 to Rs 45,000. In Indirapuram, rates of flats have come down to Rs 2,500 to Rs 2,700 per sq ft from Rs 3,000 to Rs 3,200 per sq ft.
Even prime areas in Delhi such as Friends Colony, Maharani Bagh, GK I & II, Prithviraj Road and Hauz Khas have witnessed a 5-10% fall in the prices
However, in Mumbai, prices at Colaba, Cuffe Parade, Central Worli, Bandra and Juhu have remained stable in the last three months. The story is the same in Bangalore, Hyderabad and Chennai where the market has not witnessed an increase in the last one quarter. In Pune, localities like Kalyani Nagar have witnessed a dip of 15% in residential values in the last three months.
Says Shveta Jain associate director (residential) Cushman & Wakefield India: “The exceedingly high price points and spiralling interest rates have contributed to a reduction in interest from speculative investors due to decrease in holding power, resulting in a clear shift to a largely end-user-led demand. More price sensitive locations and developments in certain parts of the country have been witnessing a rationalisation of capital values in recent months, wherein the market is finally reaching price thresholds.”
Agrees Santhosh Kumar, deputy CEO of Jones Lang LaSalle Meghraj (JLLM), a property consultant. “In the current real estate scenario, what is being observed is a stabilisation of select markets. A consistent upswing is not possible in any market,” he says.
“When a large level of supply is in the offering. Real estate markets have observed high growth levels in the recent past. However, in certain areas, market stabilisation has been observed. This indicates that there are not many buyers for the prices quoted for various real estate typologies at this point of time,” says Santhosh Kumar, deputy CEO of Jones Lang LaSalle Meghraj.
In fact, Sunday ET spoke to a number of developers, but they refused to comment on the price correction. But they agreed that there was a slowdown in the last three months. Many of them felt that the biggest risk to growth in this sector was sales to speculators. Of course, how this inventory build-up will affect prices going forward remains to be seen. Further, the developers’ tendency to divert money from one project to another — rather than to keep a financial cushion — can lead to a chain reaction, they added.
In various markets, despite a slowdown in demand, essentially from the speculative investors, developers have refrained from reducing rates and instead some of them have started offering incentives to attract buyers. Sales in secondary markets have also taken a beating with very few transactions taking place at relatively lower price points than market expectations.

What are the winning formula of frontline stocks!

2008-05-10T19:42:00.000-07:00

Broad market participation, intense market strength, greater marketability and high quality business. These are not bullet points of a power point presentation showing strengths of a business, but the winning formula of frontline stocks on Dalal Street. Often referred to as ‘market movers’, they decide if bulls would roar or bears would hug stock markets on any given day. Here’s an insight into why these stocks rule over others and the reasons behind their stable performance. Market movers
A lot of investors confuse the identity of frontline stocks with companies that form part of National Stock Exchange (NSE) benchmark index, Nifty, and Bombay Stock Exchange (NSE) benchmark index, Sensex. Analysts point out that though most of the Nifty and Sensex stocks meet these parameters, not all qualify as frontline stocks.
Explains Amitabh Chakraborty, president (equity), Religare Securities: “There are some stocks in the BSE 100 index and MSCI index too which are considered to be frontline stocks. They, however, are usually placed in the A group, which has good volume, distributed ownership and strong profitability. They may also enjoy leadership position in the industry and most of the F&O stocks meet this criterion.”
He cites the example of stocks such as Reliance Industries, RPL, RNRL, SBI, Tata Steel, Tata Motors, IFCI and Ispat Industries which enjoy trading volumes even on bad days, hence ensuring instant liquidity to investors who wish to pull out.
According to analysts, frontline stocks can be best identified with characteristics of low to moderate risk, high-quality business and high fancy among investors. Normally, their leadership position in the industry not only helps them thrive in a deteriorating market but also outperform the benchmark in booming markets. “Generally they are the market movers. They have the capability to quickly rebound from massive, market-wide sell-offs,” says D K Aggarwal, director of SMC Global Securities.
Delightful mix
As a thumb rule, feel analysts, frontline stocks can comprise 50% of the total portfolio of a retail investor. If you are looking for liquidity, analysts recommend an allocation of as high 60-70%, since exit is easy on a bad day. “Eventually, they provide stability and liquidity to your portfolio,” argues Ashok Kumar Jain, chairman and managing director, Arihant Capital Markets.
As far as returns are concerned, in a structural bull market, analysts say, you can expect these stocks to deliver around 20-30% compounded annual average return. Though over a short-term, returns can be negative, if the market becomes volatile. These stocks are also favoured by stock analysts. And not without a reason. For instance, over the last three years, stocks (as on January 1, 2008) of companies such as RIL, SBI, L&T, BHEL and Bharti Airtel have all delivered average annualised returns of 50% to 110%.
On the investment horizon, Jain believes that you should stay invested for a minimum of two-three years to reap good dividends. “They are relatively stable stocks due to institutional holding, as most institutions are long-term players and do not take their investment decisions based on short term volatility,” he reasons. According to him, a good mix of frontline and mid-cap stocks in a portfolio can deliver the required alpha and generate decent returns over medium to long-term period.
Aggarwal, however, feels there can’t be a general rule for the time you should remain invested in a frontliner. “They are the high-quality, low-risk stocks with high alpha. You need to have a broader view and a long-term perspective of one-three years once you decide to invest in frontliners. No doubt, these stock fall in a bearish market, but the downside is capped to a limit of their fair value. However, in times of a bullish market, frontliners are the stocks which recover quickly and sometimes even more than the market,” he says. He agrees that past performance is no guarantee of future results, but bases his argument on the fact that a 25% plus return on yearly basis can’t be ignored. “There’s something reassuring about these stocks that they go up year after year,” he says.
Zip ahead
Frontline stocks deliver good returns even when the market is choppy. Experts say this is due to high interest shown by foreign institutional investors and fund houses. “These are stocks which have most of the institutional interest and always trade at a premium against their mid and small-cap peers due to continuous buying interest,” says Jain. Aggarwal too agrees. “It’s a play of high alphas and low betas which helps them pass through rough weathers. Also, they are traded a lot and watched by many people,” he says.
On why the price of these stocks is relatively stable, Aggarwal says that if a stock is cheap, speculators in the market tend to buy it. And if a stock is costly, another set of speculators tend to sell it. Therefore, the efforts of professional speculators make prices ‘fair’, and the normal investor benefits from their efforts at zero cost. “Also, long-term investors feel safe to buy a liquid stock,” he insists.
Perhaps, that’s one of the reasons why a driver who grabs a pole position eventually sets the track on fire and wins the race most of the times!

Want to earn like Warren Buffett? 24 tips

2008-05-05T08:53:00.000-07:00

"An investor needs to do very few things right as long as he or she avoids big mistakes. " Warren Buffett
One of the world's most successful investors, Warren Buffett is the richest man on earth. Chairman of the Berkshire Hathaway, Buffett's wealth jumped by $10 billion to hit $62 billion during 2007. Buffett's life is an inspiration for investors across the globe.
So what makes the world's wealthiest man so rich? Buffett believes that successful investing is about having common sense, patience and independent research.
'How Buffett Does It', by James Pardoe is a great guide for investing in any market. A look into Buffett's simple, yet intelligent mantras for investing and minting millions.
1. A frugal billionaire Buffett believes in simplicity. He advises investors to take easy decisions. Never buy when you are doubtful. Invest only if you understand the businesses well.
2. Focus on not losing money rather than making it. Don't own any stock for 10 minutes that you wouldn't own for 10 years.
3. A proponent of value investing, he believes that one must take decisions on his own. He doesn't believe in listening to analysts or brokers. The best investing decisions come from oneself.
"It is not necessary to do extraordinary things to get extraordinary results."
4. Buffett advises to invest in 'old economy' businesses, companies, which have been around for fifty years and will continue to have a long innings.
5. We have often heard of people suffering heart attacks when markets crash. Well, Buffett advocates a sound temperament for stock market success.
6. You don't need to be a genius to succeed in the stock markets. People who can stay cool will succeed in the long run. Always keep in mind the hidden costs, from commissions on active stock trading to high mutual fund fees.
7. Buffett always looks at businesses he can understand, look at the profits in the past, long-term potential of the company, good top level management of the company and companies that have a good value proposition. The strategy is to think about the business in the long term.
"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."
8. Invest in businesses with great management. Always keep a track of the management of the company. The top decision makers have a lot to do with the company's performance.
9. One of Buffet's biggest strengths is independent thinking. Many people go by what the experts says or what others do but belief in one's own judgement is the key to stock market success.
10. Patience pays, says Buffet. He says one must not worry too much about the price of the stocks. What's more important is the nature of business of the company, earnings capability and its future potential.
11. Don't target just stocks, look at businesses. How a company performs is key to its stock market performance. You must know the track record of a company before you invest in it.
"Price is what you pay. Value is what you get."
12. Prices keep changing. Don't get worried by the ups and downs. Investing is all about creating wealth. It's important to understand the value of a stock than its price.
13. He believes that franchisee businesses are good opportunities to invest in. Avoid hi-tech, complex businesses. Look for businesses that are set to diversify and grow.
14. Never be disappointed when markets fall. Take it as a buying opportunity. Buffet says one must have lesser number of investments with more money in each lot.
15. He advises to avoid diversification. Invest in companies with sound business models. Choose a few good ones and stay invested, it will give you the benefits.
"I don't look to jump over 7-foot bars; I look around for 1-foot bars that I can step over."
16. Doing nothing pays at times! One must not jump at price fluctuations and take impulsive decisions.
17. Don't get carried away by market forecasts. Ignore market swings and remain an investor with a good business sense.
18. Buffett advises to be fearful when others are greedy and greedy when others are fearful. Buy when people are selling and sell when people are buying.
19. Make a list of companies, sectors that you find safe to invest in and try to stick to the list.
20. A sound business, strong management, good fundamental and low stock price should be a must-buy.
"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."
21. Try to ignore stock charts, says Buffett. They may not give the right indicators. A stock which may have done well earlier may not do so in future.
22. Buffet spends a lot of time on reading and more importantly thinking. Reading helps investors, so spend a lot of time reading about the stocks, companies and markets. A good investor must have a good knowledge base.
23. A good investor also needs to be efficient. Investors may have great capabilities but many do not make use of it. One needs to hone skills to meet the targets.
24. Good investors never rush to make money. They give time, thought and work on investment decisions. The mistakes that others make should be a lesson for you.

Are my funds in ULIPs safe?

2008-05-05T08:52:00.000-07:00

The stockmarket has been showing signs of weakness. Should this worry participants in equity through unit-linked insurance plans? The product is best for generating wealth over periods not less than 10 years. There is also enough evidence to show that equity outperforms other assets over the long term and can give annualised returns of 15-20 per cent.
The volatility that equity markets are experiencing now is not unusual for this asset market. Sashi Krishnan, CIO, Bajaj Allianz Life Insurance, says, "For Ulips, which target consistent long-term performance, the time horizon of the investment portfolio plays a significant role. Since the portfolio is managed with a long-term perspective, the hindrance of short-term swings in the market is countered to a great extent."
Existing holders. If you are holding Ulips with full exposure to equity, you should stay invested that way till maturity is around five years away. Ulips allow you to switch your corpus to non-equity options like debt or balanced funds. So, if you want to move some of your gains, you may do so.
If you have been putting your premiums into the debt fund option, now is the time to move into equity. You can do this in two ways, by moving the entire corpus in one go or by transferring smaller amounts at regular intervals.
New buyers. Consider investing in a Ulip for the right reasons. Weak or strong market conditions should never make you begin saving in any asset class or financial product. Ulips are ideally used to create wealth to meet long-term financial objectives with the fallback option of using the cash to pay for exigencies.
The equity fund option is the best option, so go for a fund that takes 100 per cent exposure to stocks. The other way to go about it is to put the premium into a debt or a balanced fund and then switch to equity when you feel that market is strengthening. The problem with this is that you will have to time the market, which you should ideally avoid.
What to do. A good approach for a new or existing Ulip-holder is to stay in the equity fund for most of the policy term. Gains of more than 20 per cent in any year may be shifted into the debt or balanced funds.
Markets move in cycles and there could be three or four opportunities of extraordinary returns in a 15-20-year holding period.
And when you start restructuring your fund options, ensure that optimum balance is maintained between returns and life coverage in your Ulip.
Lowering the sum assured to maximise returns may leave you short of the life cover that your family needs.
Finally, uncertain market conditions, as are being seen now, should never be the cue for making full exits from Ulips. The costs in most Ulips are front-loaded and, hence, it is important to make them run their full course.

IPL - The new marketing cocktail

2008-05-05T08:50:00.000-07:00

The IPL auction of cricketers in February was called the 'Mumbai Cattle Market' by those horrified by the tamasha of industrialists and filmstars throwing dollars at players. Adam Gilchrist did say that he, for one, felt like a cow. The creme de la creme of the stars were placed for bidding and lapped up at varying prices - more for their local star attraction value rather than their cricketing skills. (A Ponting drew less than an Irfan Pathan!).
As a cricket aficionado, it hurt to see filmstars, who live in a fake world of make up and retakes, put a price on players who play real games in real time with real skills. But that's the power of money. While the process did seem distasteful, the money earned by the stars can't be grudged - this was fair compensation for the blood, sweat and tears they give to the game and for the country.
It's not cricket, stupid! It's business!
Like it or hate it, the IPL is here. Whether it will stay on or die, the performance of the first edition, which is currently on, will decide.
The IPL is the biggest marketing initiative of 2008. If five-day cricket was the creation of sports aficionados and one-day a product of the media, then the IPL is a result of business.
And as all business is ultimately marketing, it's a marketing concoction. It's about BCCI, business houses, the media and the film industry putting their collective might to create abrand of unprecedented proportions.
From a consumer viewpoint, IPL is a cocktail of four Indian diseases.
First, the base: cricket. Since India won the World Cup in 1983, the disease has been spreading like an epidemic. Today, despite a surfeit of matches, interest hasn't waned. The centre of gravity of the game is today the Indian sub-continent. The BCCI is so powerful that it can get its way on any cricketing issue - on or off the field.
Add some glamour in the form of cinema. It has been the opium of the Indian masses. The arrival of television has not diminished its power. For movie, entertainment or news channels, cinema is the biggest source of TRPs.
Whether it is by doing world premieres of the latest 'flop'busters or 'block'busters, hosting award shows or just covering the latest gossip about the stars and their lives, cinema feeds into home entertainment just like cricket.
Shake it with some celebration. Indians need an excuse to celebrate, to enjoy. Our respect for all faiths gives the average Indian a festival to celebrate almost everyday. Each has its own rituals of the community coming together to dance, sing and create general cacophony, unmindful of environment pollution and civic sense.
Finally, top it with Celebrity Craze. India is a country of 330 million Gods and we make heroes very easily. Cricket stars or film stars, they are easily deified and venerated. People flock in thousands just for a real life glimpse of their heroes - often it is part of the national hobby of timepass.
IPL: The successful business of cricket
India is, perhaps, the only country where a film star, just released from jail, returns to a hero's welcome and stands on his balcony waving to his fans as if he has returned from a successful accomplishment.
When these four potent ingredients come together, the cocktail is called the Indian Premier League. Package this in a business proposition and you have something that could re-write the rules of business, sports and entertainment.
With the backing of some of the best business groups and the high-decibel promotion, it makes for an experiment worth watching and tracking.
The IPL breaks new ground in many ways.
Cricket started as a competitive sport of bat-vs-ball. The media took it to the masses as entertainment. The IPL is now converting cricket into a marketing show. No longer are cricketers just players on the cricket field, they are performers.
And every match is not just a fight between two teams but an episode in a continuous soap opera. Brands can be plugged anywhere - in program, on cast, on television, in-stores through merchandise.
Cricketers have their own star power, which makes the game attractive. Now, they have the added firepower of celebrities - be it filmstars like Shahrukh Khan or Preity Zinta, or a business tycoon like Dr Vijay Mallya - that makes the spectacle even grander and bigger. It brings together the appeal of two diseases - cricket and films.
Cricket has been a national passion. It has been difficult to separate the Indian identity from the game. The IPL makes a shift - it taps into local pride. In a global world, where integration is the key, IPL teams are built on the counter-culture of division. Paul Harris, an eminent LSE sociologist, says local identity is an opportunity in a global world. TheIPL is, perhaps, latching onto an emerging trend.
Cricket has been a team game - built on players knowing each other and playing alongside each other at the nets, at domestic level and national level. The IPL changes this and brings the corporate style of teamwork into play.
It expects professionals to come together for a specific project. It hinges on individual prowess adding up to a winning formula. With much cricket being played anyway, foreign players are no longer alien to any team. Simultaneously, the mixed-cultures team could unconsciously foster greater harmony among different nations.
Will this spell the end of other forms of cricket: five-day cricket or one-day internationals? While it may seem so, the truth is every product has its place in this world if properly nurtured. Fast-food restaurants and take-away joints didn't kill sit-down restaurants. There are moments for quick eats and other occasions when food is ceremonial and a celebration.
If one-day internationals took cricket to larger masses through television, the IPL could make cricket truly global. City pride is universal. So, no longer do cities in non-cricketing countries need to have local talent to field a team. It's just a case of buying the best talent!
The 80s and 90s were eras when cricketers became bigger than the game. While star power could be the initial draw, the attempt of marketing efforts is to draw loyalty from stars to teams. Hopefully, in the future stars would want to play for a team rather than the other way round. Thus, the IPL could bring focus back to the game!
Finally, on a jingoistic note, it could be an Indian "brand" export to the world. Without doubt, Lalit Modi's experiment and the business houses support it has received needs to be lauded.
Something worth thinking about.

'India is a land of billion opportunities'

2008-05-05T08:49:00.001-07:00

Business leaders across the world must come forward to correct the 'imbalance' in terms of incomes of the rich and the poor, Mukesh Ambani, chairman of the Reliance Industries said.
"We cannot have islands of prosperity in the oceans of poverty and squalor, and for businesses to win respect, they have to come with new business models that balances the world," Ambani said in his address at the Waldorf Astoria hotel in New York after the America India Foundation (AIF) honoured him for his economic and philanthropic commitment during its spring gala fund-raising event.

Fixed Maturity Plans are back in fashion this summer

2008-05-04T11:39:00.000-07:00

MUMBAI: For officials at fund houses, the April to June quarter is mostly about enjoying bonuses and mangoes. A temporary respite from pushing fixed maturity plans (FMPs) to treasury managers and wealthy individuals the whole year round. For, the abundant money in the system at the beginning of the new fiscal, have always made FMPs an unattractive option for investors, returns wise.
However, this time round fund managers may not be able to enjoy their ‘fruits of labour’ to the fullest. Thanks to the sudden hardening of the interest rate scenario and possibility of RBI going in for another rate hike in its upcoming policy review, FMPs are back in fashion in the summer of 2008.
More than a dozen FMPs of three-months, half-year and one-year durations are currently open. Fund officials said in case the RBI actually hikes rates at its April 29 meeting, investors can hope for some more offerings in the coming days.
“There is a lot of money to be made at the shorter end of the curve,” said ING Vysya Mutual Fund head-fixed income K Ramanathan, whose fund house has a 3-month FMP closing on Thursday. What he means is that funds that invest in bonds of the shorter duration, say of three months, can fetch good yields for investors, because of the central bank’s hawkish stance on interest rates
Investors usually bet on a stock or a bond much in advance to an expected event, which this time around is a likely rate hike by the central bank. FMPs are close-ended schemes that seek to generate regular returns by investing in debt, government and money market instruments. FMPs invest in instruments that generally mature in line with the duration of its scheme.
Though the returns offered by FMPs are not assured, investors can safely expect returns that are in tune with the prevailing interest rate scenario. In fact, fund houses give out indicative yields to prospective investors, in the hope of attracting them.
The summer of 2008 has seen yields going up very strongly and three-month paper is currently quoting at a rate between 8.9 to 9.2%. A few months ago, the yields on the same paper were in the range of 8.25% to 8.5%.
AIG Investments head-fixed income Sandeep Bagla points out that there were more FMPs hitting the market a month ago and expects things to pick up going further. “The trend may peak in case RBI actually hikes rates this month-end,” he predicts. “Yields on corporate bonds are yet to go up. This should happen soon (making FMPs still more attractive),” he says.
Most analysts are predicting that RBI will have to raise rates further to bring down the rising inflation, that is threatening to hit UPA regime’s record. “We think that the RBI will go for a 25 basis points increase in repo rate. The guiding principle would be to arrest inflationary expectations and further slow demand,” analysts at Goldman Sachs recently said in a note to their clients.

Planning an FD? It's time to rethink

2008-05-04T11:35:00.000-07:00

The last few months have been quite hard on investors, with highly volatile stock markets and rising inflation working in tandem to erode their wealth. The steep fall in markets and continued volatility had lead to small investors considering shifting their funds to debt funds, and the traditional favourite fixed deposits. However, now that the rate of inflation has hit a 41-month high of 7.41%, thereby threatening to render the real rate of return on FDs unattractive, it is time to rethink.
While it often does not find favour with investment advisors, a sizeable number of small investors continue to repose faith in the ‘safe’ FD. At present, they also feel encouraged by the fact that interest rates are showing no signs of softening in the short-term.
Besides, RBI is expected to hike the cash reserve ratio (CRR) by end April, which could result in interest rates inching upwards, translating into higher returns on term deposits. At a time when investors are scouting for answers, it’s worthwhile to find out how people who manage others’ wealth the financial planners view FD as an investment avenue at this stage.
Says financial advisory firm Transcend director Kartik Jhaveri: “I wouldn’t recommend FDs to anyone at this point in time. The simple question to ask while making the investment decision is: Will the interest earned on FD be able to beat the combined effect of inflation and taxation? The answer is no, because for that, the FD will have to yield a return of more than 10%, which no bank offers at the moment.”
Most banks’ deposit rates today are in the range of 8-9% for 1-5 years. In case some bank is offering a rate of interest higher than other banks, it is essential to verify the credentials of that bank before locking-in your funds into its deposit scheme.
My Financial Advisor director Amar Pandit has a slightly different take on the subject: “In case of people who have already parked their funds in high interest FDs that offer an interest rate of over 9%, staying put would be advisable as they could lose out on the interest otherwise.
However, if they have invested in low-yielding FDs, offering a return of 5-7% and the FD’s maturity is some time away, they can look at exiting it after considering the penalty.” His advice for those who intend to renew the term deposits now or infuse fresh money into the same is to wait and watch. “If the expected CRR hike materialises, FDs can become attractive as the money will become dearer causing interest rates to go up. Therefore, loans as well as fixed deposits could command a higher rate of interest,” he adds.
However, Mr Jhaveri does not believe that the likely CRR hike would have any major impact on returns offered by FDs. “Even if the CRR — and consequently, the bank rate goes up, the increase will be marginal.” His recommendation includes fixed maturity plans (FMPs) and other near-term funds. One needn’t direct all the investment towards equity-oriented schemes, a major chunk can go into debt funds. “Other savings avenues may come with some degree of volatility, but they would at least maintain your wealth, if not grow it. On the other hand, if you invest in FDs in times of high inflation, it will act as a wealth destroyer,” he opines.
And what approach should senior citizens and risk-averse investors who are inclined towards investing in bank deposits adopt? Replies Mr Pandit: “f they must invest in FDs, it’ advisable to wait for some time to get better deals. They can also go for lucrative long-term double indexation FMPs. Senior citizens can opt for 9% Senior Citizens Savings Scheme, PPF (withdrawals) and well-managed monthly income plans, with an equity component of around 20-25%. Additionally, some exposure to debt funds can be taken if the CRR hike takes place.”

RBI to launch credit cards

2008-05-04T11:34:00.000-07:00

KOLKATA: The Reserve Bank of India (RBI) will launch an IndiaPay credit card - an Indian version of the China UnionPay card - by the end of next year. "Inspired by the success of the China UnionPay card, we will be launching a similar one in our country to promote the use of plastic money among Indians. The credit card will be especially designed for the common people with low interest rates and risk reduction facilities," RBI executive director R.B. Barman told reporters on the sidelines of a press conference Saturday evening. Barman said the National Payment Council of India (NPCI) is working on the registration process of the card.
The NPCI authorities would decide on the type of the card - whether it would be a smart card or something else. "If all our plans and government procedures gel well then we can hope to release this card in the market by the end of 2009," he added. The China UnionPay card was introduced in 2002.
The card gives access to over 85,000 ATM counters of 14 major and other minor banks across the world. Besides, the card can function as regular MasterCard or Visa credit cards abroad.

A serial entrepreneur finds his true calling, finally

2008-05-02T09:37:00.000-07:00

Mice or meetings, incentives, conferences & events is a multi-billion dollar industry globally, but until a few years ago, India lacked specialists in this field. But as globalisation brought several modern business practices into the country, companies were increasingly looking for unique ideas to incentivise their employees. It is here that Sushil Wadhwa saw an opportunity in 2002.
Travel is the biggest form of incentive globally, he says. And travelling was his perk too. “My passion for travel and events was a big motivation for me to decide on starting Platinum.” MICE segment is currently a $270-billion industry globally and it is growing at 30% yearly.
But, Platinum is not his first entrepreneurial venture. He started honing his entrepreneurial skills by running his family business of restaurants and being a hotel management graduate was of help. But, the family business was not a very exciting venture for him, and so he decided to start something on his own, albeit on a smaller scale. The growth options for hotel chains were not much back then, he says.
In his early 20s, he ventured into processed food business. In Belgaum, he created his own branding and marketing company, a one-man show, of a food processing unit. Due to lack of experience, he had to close shop after a year. He lost his total investment. “But I was determined to carry on,” he says. It was the time of power crisis in the 1990s and he ventured into marketing generators. In two years he earned good money, but after that the business didn’t pick up. Then came his next venture, selling textiles to exporters. It lasted till the stock did. He believes that his diverse experience with various entrepreneurial ventures in the past, strengthened his business acumen.
Then, he joined a friend’s company, which dealt with event and party management for corporates. “It was a great experience and exposed me to the MICE segment,” he says. “It was while working in that company I realised how big this segment is, and I was determined to start my own company dedicated to this segment,” he adds.
Platinum was started in 2002, with an investment of Rs 5 lakh in a garage in Santa Cruz, Mumbai. Now the turnover is around Rs 20 crore with 50 employees and two offices and five in the pipeline. Platinum offers service solutions from design to execution, across events, conferences and incentive programmes.
Companies are no longer content with mundane itineraries, which include the usual sightseeing and gala dinner. “Companies are increasingly looking at experiences that have a perception of ‘money can’t buy’, so that the target audience remains motivated and charged up to achieve their targets,” explains Mr Wadhwa.

Sonia, Tata & Nooyi in Time's 'most influential'

2008-05-02T09:34:00.000-07:00

NEW DELHI: Congress president Sonia Gandhi has once again made it to Time’s list of 100 most-influential people in the world. She is the only Indian politician on the list but has Tata group chairman Ratan Tata and PepsiCo CEO Indra Nooyi for company.
Along with figuring on the Time list in 2007, Ms Gandhi was also on the Forbes list of 100 most powerful women last year. The write up on Ms Gandhi in the magazine by former UN diplomat, Sashi Tharoor, says: “The story of Sonia Gandhi, 61, is remarkable at every level, and the fairy-tale metaphor barely begins to scratch the surface of its extraordinariness.”
He goes on to describe her story saying, “A novelist seeking to tell the story of Sonia Gandhi may be forgiven for seeing a fairy-tale element in the narrative: Beautiful foreigner comes to strange new land and marries handsome prince... But there is a twist to the tale....” Mr Tharoor then says that the “queen” when offered “the crown on a brocade cushion, turns it down”.

She prefers to remain behind the throne, walking with the peasantry, rallying the people but leaving power in the hands of her grey-haired viziers,” he writes. Incidentally, Prime Minister Manmohan Singh too was on the list in 2005.
The Congress president has been named in category of ‘leaders and revolutionaries’, along with Dalai Lama, Russian president Vladimir Putin and US presidential hopefuls Barack Obama, Hillary Clinton, John McCain and president George Bush.
Under the most influential business people, named under the ‘Builders and Titans’ category, Mr Tata and Ms Nooyi find mention. Former British prime minister Tony Blair, Myanmar’s Aung San Suu Kyi, China’s Hu Jintao, Malaysian leader Anwar Ibrahim, Iraqi leader Muqtada al-Sadr, Pakistan army chief Ashfaq Kayani, and Baitullah Mehsud — which the magazine said has been alleged to be the mastermind of Benazir Bhutto’s assassination — are also on the list.

India Inc storms global brandscape

2008-05-02T09:32:00.000-07:00

MUMBAI: The rapid economic rise of India, by now almost a cliche, is evidently rubbing off on all aspects of the country — not the least on its various popular brands that are increasingly becoming the talking point worldover.
On her first ever visit to the country, Lisa Kettman-Kervinen , director of Worldwide Partners, a global network of 92 advertising agencies, is looking to leverage this curiosity to forge strong ties with the offerings India Inc has to make.
“Indian brands have huge potential abroad. As compared to other countries, India has grown in popularity. There are a lot of questions about India, its people and its brands, and we are fielding a lot more requests about the growing Indian market,” says Lisa Kettman-Kervinen.
“The Tata brand,” continues Kervinen, “is a talking point in corporate circles abroad. It is a really fascinating brand and we would love to help brands like that and several others get their shot in the sun. Given the fact that we have requests from many midsized companies in the US, Europe and the Middle East about Indian corporates, it is time India can stake its claim for the global spotlight.”
In the country on her first visit, Kervinen says she is not overawed by the silhouettes of high-rises punctuating the modern skyline, cheek to cheek with gleaming urban malls, both ready to serve Mumbai’s growing, consumer-oriented middle class.
There are clear, visible signs that India’s newfound status as a rapidly developing economic powerhouse is being noticed in the global marketplace . Not only can the Tata group enjoy strong market share across Asia, many other Indian brands can make a global statement.
There are also several global brands which would love to signal a distinctive link with India,” she adds. Citing a few examples like Novartis’ Ciba Vision, already present in the country, or Avon fragrances, which is to roll out a new campaign across 20 countries, Kervinen says the market is ripe.
A hard fought for account , the joint campaign for Ciba Vision was rolled out in London and New York, as also in Europe and Latin America. Next on the agenda — India.
Research by Worldwide Partner’s for Ciba Vision showed that people in Europe did not want to change their eye colour on a daily basis, so the message there had to be much more subdued, but research also threw up insights into the US market, where consumers were eager to change their eye colour on a daily basis, almost like changing hair colour.
Worldwide Partners has $3.3 billion in capitalised billings making it the ninth largest marketing organisation. Adds Kervinen, “Due to our vast network of 92 independent agencies , we can tap into the local resources of partners and get their local vision. We are a bottom-up organisation, not a top-down organisation.”

Husband-wife partnerships a good combination for business

2008-05-02T09:28:00.000-07:00

Hen Kaushal Mehta, who runs Motif India BPO in Ahmedabad, wants to bounce off expansion plans with his business partner, all he has to do is sip coffee in his living room and talk it over with his wife Parul.
In an age when entrepreneurs are struggling hard to find work-life balance, an increasingly less rare breed of people are finding work and life with the same person. They are the ones who shamelessly poke their noses into each other’s business, literally. Entrepreneurial couples or spouses — who share a home and also a company — make up one of the most dynamic and unexpected forces in the start-up world today.
“Running a business together is one way of turning your bitter half into a better half,” says Reeta Gupta, the co-founder of Jumbo King Vadapav. “We already had a failed business behind us, so when we decided to start a new business, that is Jumbo King, we perfectly knew each other’s limitations.
Also, the capital with which we started our business was too little for us to afford hiring professionals, which meant that doing the business together was the only option before us,” she says. Reeta and her husband Dheeraj founded the Jumbo King chain of outlets in 2001. Currently, they have nearly 52 outlets operational across the country. Reeta today serves as the company’s whole-time director.
According to a study conducted by Rhonda Abrams, author of the best-seller The Successful Business Plan: Secrets & Strategies, nearly 82% of married entrepreneurs said being married improved their company’s finances, while 50% of entrepreneurs said being married improved their ability to focus on their business. The conclusion? Walk down the aisle and your bank account benefits.
Another study found as many as one-third of today’s start-up enterprises are co-owned and co-managed by entrepreneurs, who are also partners in their personal lives. “It was a natural and a logical option when I was looking to share my business vision for Jumbo King,” says Dheeraj, “who better to understand what you feel than your life partner, we were together in the bad times, when my first business shut down, and now I wanted her to be with me in our good times when I started Jumbo King.” Incidentally, Jumbo King received a private equity funding of Rs 22 crore recently.

Safe investment? Hold 5% of assets in gold

2008-05-01T04:19:00.001-07:00

Do things like mutual funds baffle you? Are you aware of the investment options they provide? What are the best mutual funds available in the market? Which funds accrue maximum profits?What are the crieria for evaluating a fund? Which funds provide the best SIP options? Are SIPs the easy way of making quick bucks? When and how should one buy mutual funds?To get answers to your queries, speak to mutual fund expert Rahul Goel.
Rahul Goel says, Good afternoon! Welcome to the discussion on financial planning! Let's start!
Raman asked, Hi Gd Afternoon, Is it really safe to invest in mutual funds at this point of time? Pl give 2 or 3 best mutual funds. Thank you. Rahul Goel answers, at 2008-04-10 12:46:53raman, hi. you are probably referring to equity funds here. well, since the underlying of an equity fund is equities, there is bound to be high risk associated with the investment. yes, you can try and minimise the risk by investing at valuations which are attractive, but even then you can never be sure. so, if you are looking at investing for a 3-yr tenure, and are ready to take on the risk of near term losses, then you should surely consider investing in funds like hdfc top 200. pl note that you should always invest in line with your planned asset allocation. a disciplined investor has a much better chance of achieving the desired results.
yd asked, Considering current senario is it good to invest lumpsum or to invest in SIPS?Rahul Goel answers, hi. this again depends on various factors. lets say you as part of your asset allocation you were meant to invest rs 100 in equities; you have already invested rs 90. then the rs 10 can be put in now; but if you have a large chunk yet to be inevsted, then its best to spread it over six months. there can be an exception where an investor understands that the valuations are attractive now, and he really does not care about near term losses... in such instances even a lump sum investment will make sense. so in short, the answer will vary.
jitendra asked, Good afternoon sir. I have sundaram select mid cap for more than 2 years. shall i continue to hold it or swith over to some other scheme of sundram. if so please let me know one scheme. and also i have two SIP in amounting to Rs.3000 in HDFC [Get Quote] Growth (Rs.2000) and Rs.1000 (JM Emerging fund). whether these two funds are good funds for long term say 2/3 yearsRahul Goel answers, jitendra, hi. sundaram select midcap in our view is a very good scheme to own; but the allocation to the same should be very low. overall midcaps should not account for more than 5 - 10% of a portfolio. with regards to the other two schemes you have mentioned, well we do not recommend any. you may want to read our recent research note on JM funds on personalfn.com (free to access).
RG asked, Sir, The mrkt seems too bad at present. How long do U think it wud take to stabilise?? Rahul Goel answers, hi. the market seems bad at 15,000. it seemed very good at 21,000! well, that's what sentiment is all about!! i think you should look at valuations as against the index number. when will it stabilise? frankly, we have no view on short term movements in the stock markets; we do not understand such movements and hence are unable to comment on them.
sireesh asked, Hi Rahul, I am an investor with medium risk attitude. I had taken 2 LIC [Get Quote] policies with 25k annual premiums each for 25 years. I had also invested in couple of ELSS schemes like HDFC tax saver,Franklin India prima plus. Hearing everwhere like investing 50k in LIC returns low yields considering inflation in the long run.Everyone is suggesting to take SIP for mutual funds. At the same time mutual funds are also sometimes risky right even in the long run in few cases? what do u suggest. Is is advisable to contine investing in LIC premiums 50k for 25 years? Rahul Goel answers, sireesh, hi. i can guide you on this only after i know which policies you have invested in. some policies of LIC actually deliver very attractive returns.
vc asked, hi i am 42 yrs and have saved 60 lacs in the ratio of 80 debt and 20 eq is this ok : pl replyRahul Goel answers, hi. no formula or thumb rule can alone help you zero in on an ideal asset allocation for you. there is a lot more that is required. if you can provide me with more detailed information about you, i will be in a better position to guide you.
manoj asked, Is it safe to invest in a mutual fund for a period of 3 to 4 years as long term investment, concerning the factors happened in stock market from two months? If it is safe and apt then what will be the percentage of growth of these funds in an average?Rahul Goel answers, manoj, hi. we infact find the present valuation level in the stock market attractive. we do not know if the markets will fall further. if they do, then it will be an even more attractive buying opportunity. but since we cannot time the bottom, and we find valuations to be attractive now, we are recommending to our clients to invest in the stock markets, but in line with their asset allocation. we expect returns to be about 15% compounded per annum over the next 3 - 5 yrs.
Kishore asked, I would like to know which funds or funds you would suggest for a long term say 15yrs for good returns and what would be approx interest we can expectRahul Goel answers, kishore, hi. we think over the next several years, a 15% return is a realistic estimate. and in terms of funds... well, if you are looking at equity, then funds like hdfc top 200 should be in the portfolio.
Ahmad asked, Hello rahul: Considering the current volatility in market, is it safe to invest 1 lakh in mutual funds or shall I wait for some time. I have moderate to high risk appetite and wish to invest for long term (at least 2-3 years). Please suggest some funds and advise how should I split the 1 lakh among them? thanks Rahul Goel answers, ahmad, hi. i have discussed this in an earlier response. pl refer to the same.
Abhik asked, Hi,i need to invest around 5000 INR per month in Mutual funds apart from ELSS. can you suggest a few good large cap oriented funds and also suggets a few mid-cap funds for consideration later.Rahul Goel answers, abhik, hi. why large cap and mid cap funds? why not the simple equity diversified funds??!
rasik asked, mutual fund concept is new for me can u please explain the benefit and drawback of the same Rahul Goel answers, rasik, hi. one way to learn about funds is to simply read the money simplified... its a free guide which is available on personalfn.com
Ravi asked, Hi, I have the funds HDFC Growth, Magnam Contra, Reliance Growth, DSP ML Tiger and Franklin Prima Plus in my portfolio. Please suggest any changes, if required to this portfolioRahul Goel answers, ravi, hi. you appear to be an investor with a high risk appetite and an investment tenure of atleast 3 yrs. in terms of the funds, well, our ideal portfolio for our profile like yours, would be very different... not a single fund you own would make it to our list. you need to dicuss your portfolio characteristics with your agent.. understand where you are invested and whether it suits you.
venkat asked, HI I am in investing in SBI [Get Quote] Blue Chip Growth fund since year ,It is mostly around 12.50 NAV ,Is it a Good fund to continue Rahul Goel answers, venkat, hi. we do not recommend this fund to our clients.
gupta asked, Hi Rahul, I have invested 20,000 in Rel Diversified Power Fund and 20,000 in TATA infra fund. When sensex was at 15K. What is your idea of returns I can get in 3 yr period?Rahul Goel answers, hi. you have your money in two funds, both of which are thematic. in our view, to be able to make money from such funds, you need to time your exit very well. but then, timing the markets is next to impossible. suggest you opt for diversified funds instead.
Jak asked, Hi, I am Planing to invest 5Lac in UTI Gold fund. Need your sugestion. otherwise suggest me some good funds to investRahul Goel answers, hi. are you investing in line with a planned asset allocation?
abhay_123 asked, Hi Rahul, this is Abhay, I am interested in invest money in mutual funds, can u give some good mutual funds. I am looking to invest arround 10k every monthRahul Goel answers, abhay, hi. for me to be able to recommend some funds, i need to understand more about you. why don't you send us your details and we will revert to you.
Dev asked, Hi Good afternoon, I want to invest in the mutual funds and in shares.please let me know where i can get maximum profit.Rahul Goel answers, dev, hi. investing in shares or mutual funds is a decision which all of us have to make. we have recently put out a note on the same... pl visit personalfn and read the same.
yd asked, Hi Rahul, have invested in Reliance Growth fund and Kotak opportunity fund through SIP. was it a good dicision?Rahul Goel answers, hi. we do not have any view on reliance funds. with regards to kotak opportunity, we do not recommend the same to our clients. we prefer dsp ml opportuntiy.
Harsha asked, how about investing in Reliance Natural Resources [Get Quote] MFRahul Goel answers, harsha, hi. we have no view on reliance funds. however, we do not recommend to any thematic/sectoral fund to any of our investors.
krishnan asked, Hi Goel, I have invstd. close to 1.2 lacs on Mutual funds out of which 6k is on SIP.the present value of these funds is 1.15Lacs. Its been there in invstmnt. mode since a year.Should i continue the SIP and park my money OR should i back off??Rahul Goel answers, krishnan, hi. well, assuming you have the right schemes and allocation, this is not the time to back off!! its probably time to invest!
kunal asked, Hi, I am currently investing Rs 1000 SIP each in JM emerging, Reliance regular saving, & Rs 500 in Magnum comma. Should i continue in these as mkt is down? I am planning to invest some amount in DSPML World gold fund, hows it as compared other Gold ETF's. Also I hav invested Rs 5000 each in sunderam Taxsaver & Birla Taxrelief 96 in last yr. For this yr also should i invest in them. ThanksRahul Goel answers, kunal, hi. we do not have a view on reliance. the other two funds which you own are not in our recommended list. so, i guess, you need to take a re-look at your portfolio. with regards to gold... if you have to buy "gold" then best is to buy gold in ETF or physical form... the dsp fund invests in companies which are in gold mining etc. that brings with it additional risks.
Ram asked, Ram from Singapore, Is it right time to invest in India based mutual funds?Rahul Goel answers, ram, hi. we believe that this is a good time to invest in well managed equity funds. i have given a more detailed response to an earlier such query. pl see.
Dev asked, Hi Rahul, is it better to invest in new mutual funds rather than old mututal funds.Rahul Goel answers, dev, hi. in nearly all instances, nfos are simply marketing initiatives aimed at mobilising assets for the mutual fund. they have little or nothing to offer to the investor. funds with track records are a much better bet.
Bharath asked, Hi I have planned to invest 1 Lac for 1 year in DSP ML Gold Fund. My advisor says you will get 20% min return. How true it is and what abt the safety?Rahul Goel answers, bharath, hi. i think you should report the advisor to SEBI for misleading you. if ever someone tells you that this is the minimum you will make in such short tenures, you need to tread very carefully.
yourhealth asked, Hello Rahul . I withdrew Rs. 7 lakh from my PPF and invested in various mutual funds when market was ranging from 18000 to 20400. Now what should I do ? Rahul Goel answers, hi. any reason you moved money from debt to equity? what was the rationale for the same? what is your tenure of investment? which schemes are you invested in? need to know all this to be able to give you some meaningful response.
Vajha Srinivas asked, Hi Rahul, I had started investing Rs.7000 in SIP's from Jan-07. Uptill Jan-08 I earned a return of 20% average across 4 equity funds. Suddenly there is a 20% drop and as on date my portfolio has 20% negative return. Considering this I am confused as to whether I should continue investing in Mutual funds. If so can you suggest some good equity based funds for an investment period of 5+yearsRahul Goel answers, hi. the fact that the markets have fallen, should not surprise you. also, you shouldl not expect to make a return over a 12 month period from equity funds. you need to be invested for atleast 3 yrs. so, if the funds you own are well managed, then you should continue the SIPs. but pl ensure that you are investing in line with the desired asset allocation for you.
Abhishek asked, Hi i want to invent Rs 500000 in MF for a time period of 6-8 monthsand in december - january 2009, i will switch to tax saving ELSS.please suggest whether its right time or notRahul Goel answers, abhishek, hi. for a tenure of 6 - 8 months, FMPs and other short term detbt funds are best.
Lion asked, In the current scenario, how good are the Fixed Maturity Plans ?Rahul Goel answers, hi. if you have money to be invested for a tenure of less than 12/13 months, then FMPs are a great alternative.
Kiran asked, Good Afternoon Manoj, I am 31 single, will be marrying this year. I am investing in endowment,whole life Insurance and PF covering the full bracket of 80C. I have insurance coverage for 20Lakhs. Apart from these 80C invetments I don't have any other investments and planning to invest. I can invest upto 12000 PM in Equities. Please suggest me in what mutual funds should I invest, and SIP amount for each fund. I can invest for 3 to 5 years and can leave the investments for long term. I am having surplus of 6 lakhs with Bank FDs and planning to buy Car and House in a years time.Rahul Goel answers, kiran, hi. you seem to have planned well. the monies can go into a portfolio of schemes including hdfc top 200 and dsp ml opp. i suggest that the final portfolio and allocation be done in consultation with your financial planner.
Investo asked, Hi Rahul ... what do you think about gold price rise? Is it wise to invest in gold at this time? Would the gold prices rise further over the next couple of months?Rahul Goel answers, hi. we recommend to all our clients at Personalfn that they have 5% of their assets in gold. having said that we believe the prospects for gold from a long term perspective are attractive. pl read more on gold here - www.personalfn.com/gold
suvajit asked, hi, is it better to invest in sector specific fund like power, infrastucture for a period 0f 3-4 yrs.which sector u suggest.am i going to get tax benefit out of that? Rahul Goel answers, suvajit, hi. in our view, investors should avoid such funds. yes, some can take exposure to dedicated midcap funds, but that allocation should not exceed 5 - 10% of the portfolio.
akhil asked, I invested in SBI contra,Franklin Bluechip, DSP Meryilich Tiger one month back when Sensex was 18500 but now the scenerio change suddenly now sensex from last one week between 15k to 16lk i already lost 7 percent of my total money in last one month wat should i do withdraw my money from MF or hold and wait for the better timeRahul Goel answers, akhil, hi. when you put in money, you should have been guided that in equities, volatility is given. and that one should expect to earn a return only over a 3 - 5 yr time frame. so, hang on there. but i must say that your selection of funds could have been a lot better.
Malini asked, Rahul Hi, I am 47 years of age and my husband is 50. We have saved around Rs.60 lakhs in various schemes. MF's works out to 6 L and equity 7 L. Rest are in govt. invt, ppf etc. We also have a 2 BHK in mumbai, flat of 1 bhk in Goa and a 3500 sq.ft plot in ahmedabad. I invest around 50K every month. Due you think I should now slow down and enjoy my money, instead of continuously investing? MY SIP's are 14K per month, PO NSC 30K p.m. and balance shares, FDs etcRahul Goel answers, malini, hi. the question you have asked is something that is very relevant. but i am afraid i cannot answer the same without understanding more about you... if your current investments could take care of your present and future needs, then by all means you should slow down.
shiva asked, HI Rahul, I am an NRI Engineer, 35y, marrie with one child, working in Kuwait, my net savings is 30 Lakhs after all liabilities ( monthly expense. I am looking for good MFs (deiversified) for investing abt 15 Lakhs for long term. Can you please suggest few? Rahul Goel answers, shiva, hi. given that you are at a remote destination, before investing a single rupee, be sure that you have employed the services of an honest financial planner in india. he will be able to guide you better... over a chat i am unable to ask you all that i need to know.
suman asked, do you recommend including a Index based fund in a portfolioRahul Goel answers, suman, hi. well, we believe that active funds, which are managed well, will outperform the index funds over time. however, for those investors, who are simply looking at earning a return inline with the markets, index funds are great!
rohan asked, rohan says, hi..good afternoon...am 43 yr old....where can i invest 50000 pm in mutual fund for my children education Rahul Goel answers, rohan, hi. what are the ages of your children??
kamal asked, hi rahul, I am planning to invest in Birla Sun Life Saral Jeevan policy.Is it profitable for me to invest in this period.Rahul Goel answers, kamal, hi. you wish to "invest" in an "insurance policy". time to re-think!
raniji asked, DEAR RAHULJI IF I HAVE TO SELECT ONE FROM THREE HDFC TOP 200, HDFC EQUITY & HDFC GROWTH THEN WHICH ONE IS BETTER FOR 5 YEARS OF TIME FRAME OR ELSE GO FOR COMBINATION OF TWO??Rahul Goel answers, if you are looking at a more aggressive fund, hdfc equity would fit the bill. else opt for hdfc top 200.
Rahul Goel says, Thank you all for participating in the discussion. Do write in to info@personalfn.com with your queries and/or requests to meet a personalfn consultant.

FMPs vs FDs: Which side are you on?

2008-05-01T04:02:00.000-07:00

Fixed maturity plans can be termed as the mutual fund industry's answer to Fixed Deposits (FDs). Over the years, FMPs have established themselves as an option for debt fund investors (i.e. risk-averse investors). In many cases, they occupy the slot that used to belong to FDs. This is not surprising given that both the avenues cater to the same investor category. Having said that, it is worth noting that FMPs and FDs also vary across a few critical parameters. It is important that investors appreciate the dissimilarities between the two avenues so as to make the right investment decision.
At Personalfn, we receive several queries from investors inquiring about which is the better option. This note highlights the difference between FMPs and FDs, and guides investors on selecting the option most suitable to them.
Assured returns vs Indicative returnsThe defining feature of both FMPs and FDs is that investors know in advance how much return they will earn on maturity. The difference is, while the returns on FDs are assured, returns on FMPs are indicative. However, many investors confuse FMPs with FDs and believe that the returns offered by FMPs are also assured.
FMPs are actually close-ended debt funds (investments can be made only during the new fund offer period) with a fixed maturity offering an indicative yield (both the maturity and yield is known upfront). Here the keyword is indicative. That means, on maturity, there is a possibility of the actual returns deviating from what has been indicated to investors at the time of investing. On the other hand, returns are guaranteed in an FD and investors are assured of receiving the same on maturity (assuming there is no credit default).
FMPs: Don't ignore the risk
Varying tax treatmentThe tax treatment on interest income is different for FMPs and FDs. In FDs, the interest income is added to the investor's income and is taxable at the applicable tax slab (or the marginal rate of tax).
As far as FMPs are concerned, the tax implication depends upon the investment option -- dividend or growth. In the dividend option, investors have to bear the Dividend Distribution Tax. Whereas in the growth option, returns earned are treated as capital gains (short-term or long-term depending on the investment tenure). In the case of short-term capital gains (i.e. if investments are held for less than 365 days), the interest income is added to the investor's income and is taxed at the marginal rate of tax.
As for long-term capital gains (if investments are held for more than 365 days), the tax liability is computed using two methods i.e. with indexation (charged at 20 per cent plus surcharge) and without indexation (charged at 10 per cent plus surcharge); the tax liability will be the lower of the two. Thanks to the indexation benefit, FMPs end up delivering more tax efficient returns than FDs. (We have not displayed the 'without indexation' option, as the tax liability in the 'with indexation' option is lower. CII-Cost Inflation Index, NA-Not Applicable)
Take an investor who had invested Rs 100,000 in an FMP and an FD (both having a maturity of 375 days) in the financial year 2006-07. Both, the FMP and FD offered a return of 8.25 per cent and were due to mature in the year 2007-2008. After adjusting for tax, investor earns a return of 7.74 per cent on the FMP; while the post-tax return on the FD is 5.45 per cent (assuming he is in the highest tax bracket). The higher tax-adjusted return on the FMP can be attributed to the indexation benefit.
Investors must note that in the above calculation we have made some assumptions:
1. We have assumed a past scenario for ease of understanding and because of the availability of important information such as the Cost Inflation Index, which is used in the calculation.
2. The interest rate offered by FMPs and FDs in the year 2006-07 would have been different from what we have assumed here. Moreover, for ease of understanding, we have assumed the same interest rate (i.e. 8.25 per cent) for FMPs and FDs. In reality, they may offer different interest rates; in most cases the FMP, being market-linked, can be expected to offer a higher return than an FD.
3. The investor, considered in the example, falls in the highest tax bracket.
In a nutshell�While FMPs offer superior post-tax returns vis-�-vis FDs, returns offered by them are only indicative and not assured. Given the fact that returns are not assured, FMPs are riskier than FDs.
Having said that, it should be noted that FDs also have their own share of risks. FDs are usually rated; the credit rating of an FD is an indicator of the degree of risk associated with it. For instance, a rating of 'AAA/FAAA' offers the highest level of safety. So, an FD with a credit rating lower than this (as also an unrated FD) carries higher risk.
5 things to look at in an FD
What should investors do?For investors, looking for a competitive return at minimum risk, both FMPs and FDs are options. To choose between them, investors need to take into account their risk profile and investment objective among other factors. For instance, while FMPs may appeal to investors willing to take a little risk for that extra return; FDs will find favour with investors who are satisfied with a lower but assured return. Having said that, investors would do well to consult their investment advisors/financial planners to determine what avenue will be most suitable to them.

Wellcome to Indians

2008-04-30T19:33:00.000-07:00

Now a days indian people having many loans and business concepts comning.
here iam going to post all about indian business and loan market like laon intrest rates and all