MUMBAI: The Reserve Bank of India, or RBI, has approved Axis Bank’s purchase of Enam Securities, ending a 17-month wait and paving the way for the private bank to expand its business to include investment banking and other advisory services.
“The Reserve Bank of India has cleared the deal with no further conditions,” said a member on the Axis Bank board. The board will meet in Jaipur on April 26 to discuss plans for the business, he added.
Axis Bank did not respond to an email query on the issue.
Axis’ acquisition of Enam Securities is aimed at strengthening its presence in the investment banking and stock broking business. Enam is rated among the leading equity underwriters in India while Axis Bank does not feature in the league tables in this business.
The acquisition will help Axis Bank, which has a strong presence in the debt-related fund-raising business, to gain market share in equity share sales too. Asiamoney rated Enam as the fifth-best local brokerage in 2011. Critics said the deal is expensive and Axis will take a long time to recover the investment.
Also, fierce competition in the Indian investment banking space in a weak market has squeezed fees. Indian units of foreign banks have earned roughly $20 million through their equity capital market (ECM) divisions and $100 million from merger and acquisition activities in 2011.
The revenues last year were way behind what they earned in their heydays. ECM activities fetched about $400 million and M&A deals up to $600 million in fees at the peak of the bull run in 2007.
Axis struck a deal with Enam in November 2010 to buy its broking and investment banking business. But the RBI objected to the structure, forcing the two parties to revise the plan in September last year.
Instead of the bank’s subsidiary directly buying the business and Axis paying for the transaction with its shares, the revised proposal has the bank making the purchase and then transferring the business to its subsidiary Axis Securities.
The RBI objection had sparked fears that the deal could be scrapped, but the revised approval appears to have secured the central bank’s consent, which came on March 31, two people familiar with the development said.
Enam Director Manish Chokhani will be the chief executive officer of the businesses, said an executive familiar with the matter. Vallabh Bhansali, one of the founders of Enam, would not get a board seat in Axis Bank. The revised structure involves Enam shareholders getting 5.7 shares of Axis Bank for every share of Enam.
Enam shareholders will get 1.38 crore Axis Bank shares that would translate to a 3.3% stake of the bank. In the new plan, Axis Bank devised an alternative structure in which the first phase of the deal would be an all-stock deal (between Axis and Enam) and the second phase would involve a cash transaction (between Axis Bank and Axis Securities).
RBI TELLS MARKETS TO PRICE STATE BONDS ON FINANCIAL HEALTH
MUMBAI: The Reserve Bank of India (RBI) Deputy Governor Subir Gokarn on Friday said states with weaker finances are able to raise cheaper funds due to the market perception that state debt is sovereign-guaranteed. There was a need to bring about formal institutional fiscal discipline, he said. “State government debt is apparently implicitly guaranteed by the sovereign. So, with or without a formal guarantee the market perceives that state debt has been fully backed,” said Gokarn. Because of this, states with weak fiscal condition don’t pay much premium compared to those with strong fiscal conditions, he added. He was addressing the 14th Annual Money and Finance Conference organised by the Indira Gandhi Institute of Development Research here today. (For details log on to : http://www.business-standard.com/india/news/rbi-tells-mkts-to-price-state-bondsfinancial-health/470400/)
FOREX RESERVES DIP TO $294.38 BILLION
MUMBAI: India’s foreign exchange reserves declined to $294.389 billion as of March 30, from $295.140 billion in the previous week, the central bank said in its weekly statistical supplement on Friday. This is a weekly drop of $742 million compared to the increase of $319 million in the previous week. According to the data, in the financial year 2011-12, the reserves increased to the peak level of $320 billion at the first week of September, 2011 and reached its lowest at $292 billion in the second week of January, 2012. As the financial year comes to an end, the reserves are almost as same as it was in the beginning of the financial year which was at $294.011 billion. The main reasons of decline are, inter alia, the revaluation effect and intervention in the domestic foreign exchange market, said the central bank. (For details log on to : http://www.financialexpress.com/news/forex-reserves-dip-to-294.38-billion/933726/)
BAD LOANS SPARK BANK DOWNGRADES
MUMBAI: Distressed borrowers are taking a toll on the credit profiles of Indian banks with almost half a dozen lenders being downgraded by rating agencies in recent weeks. Given that most public sector banks have similar credit profiles, analysts tracking the banking sector are asking, “Who’s next?” In the past fortnight, rating agency ICRA has downgraded Central Bank of India, Oriental Bank of Commerce and Union Bank of India, citing rising bad loans and the high value of restructured loans. Some time earlier in 2012, Moody’s had lowered its credit opinion on Syndicate Bank, Union Bank and Bank of India, again citing rising bad loans. In a report after the Budget, Mahrukh Adajania of Standard Chartered said that all public sector banks have asset quality issues in the form of huge restructuring pipelines, which are more or less in the same proportion. According to the report, Allahabad Bank, Bank of Baroda, Bank of India, Canara Bank, Punjab National Bank, State Bank of India and Union Bank have restructured loans ranging from 3.5% to 5.9%. (For details log on to : http://timesofindia.indiatimes.com/business/india-business/Bad-loans-spark-bank-downgrades/articleshow/12565322.cms)
ICRA LOWERS RATINGS OF BOND PROGRAMMES OF UCO BANK
MUMBAI: Credit rating agency ICRA has lowered the ratings of various bond programmes of UCO Bank due to deterioration in the asset quality. A press release issued by ICRA said the ratings on the bank’s Rs 1,075 crore Lower Tier II bond have been cut to “AA” from “AA+.” ICRA also revised the ratings of the Rs 500-crore Upper Tier II bond and the Rs 185-crore Innovative Perpetual Debt Instrument to ‘AA-‘ from ‘AA’. The long- term ratings carry stable outlook, said the release. UCO’s asset quality deterioration is reflected in increase in the ratio of gross non-performing assets to total assets to 3.49 per cent as on December 2011, from 2.57 per cent as on December-2010. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3288564.ece)
VIJAYA BANK PLANS TO RECRUIT 1,200 EVERY YEAR
MUMBAI: Vijaya Bank plans to recruit about 1,200 clerical and officer staff every year, the bank’s Executive Director, Ms Shubhalakshmi Panse, said. She said, “We are planning to open around 100 branches every year. Besides, 800 to 900 staff will retire each year. That is a big number for a bank of our size.” This is in line with the trend seen in many other banks. With the average age of employees hovering at around 50, fresh recruitments have seen a surge in recent times. Given that the existing training infrastructure is not geared to take in such huge numbers, banks are beginning to outsource training. Bank of Baroda, for example, has aligned with the Manipal group. Vijaya Bank too is in the process of entering into a tie-up with an institution for training, said Ms Panse. She said, “We need people who are familiar with these systems and those start work on it from day one. These institutions train fresh recruits in basic banking rules and procedures and teach them to use the core banking software. They also teach them soft skills.” (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3288562.ece)
INDIAN OVERSEAS BANK TO WIDEN NETWORK BY 15% THIS YEAR
GUWAHATI: Indian Overseas Bank (IOB) plans to expand its branch network by 15% this fiscal, including Chinaand Dubai, and hire 3,500 staff to exploit rising trade between the nations and soaring consumerism. The Chennai-based lender will open 400 branches across the country, its chairman M Narendra said. It has 2,629 branches now. The bank plans to recruit 3,500 people in the official, clerical and specialist categories to support the expansion. It will set up nine regional offices across the country to strengthen its structure and speed up the decision-making process. “The 400 branches will be spread across the country, while at least 10 will be added in the north-east to the present tally of 30,” said Narendra. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/indian-overseas-bank-to-widen-network-by-15-this-year/articleshow/12565094.cms)
HINDUJA BANK TO EXPAND TRADE FINANCE BUSINESS
MUMBAI: Hinduja Bank, a Switzerland-based financial services arm of Hinduja Group, is diversifying reach of its trade finance business to emerging markets, including India. Till now, it was mainly active in Europe, the Mediterranean basin and West Asiafor trade finance. Now, the bank is diversifying its geographical reach to new emerging markets, including Indiaand South America. In line with the ongoing strategy to enhance and strengthen its trade finance services, the bank has expanded its team by hiring five senior trade finance professionals. It, however, did not disclose their names, citing a confidentiality clause. (For details log on to : http://www.business-standard.com/india/news/hinduja-bank-to-expand-trade-finance-business/470403/)
FOR INDIANS, NET BANKING SCORES OVER E-SHOPPING
NEW DELHI: A majority of Indians prefer to use the internet for banking and other financial services than shopping online, shows a new survey. Almost 57% of Indian respondents using the internet prefer to bank online and use other financial services due to hassle-free easy access and time saving feature of online banking, according to the survey conducted by research company Ipsos. Checking information on products and services online comes a close second at 53 % while 50% shop for products online. Around 42% of respondents in Indiasurfed online to look for jobs in the last three months, the survey said. “Online banking has made things much easier for the people and it saves a lot of time. It has eliminated the hassle of the traditional way of banking where one had to stand in the queue and fill up several forms,” Ipsos Indiahead (marketing communication) Biswarup Banerjee said. (For details log on to : http://www.financialexpress.com/news/for-indians-net-banking-scores-over-eshopping/933700/)
SOUTH INDIAN BANK NOW WEIGHS PREFERENTIAL, RIGHTS TO RAISE FUNDS
KOLKATA: After two aborted attempts to raise 1,000-crore capital through qualified institutional placement, or QIP, South Indian Bank may now opt for preferential allotment of shares or a rights issue. The bank managing director and chief executive VA Joseph told ET that the board will take a decision next month. “Our board will decide whether we should raise capital by way of preferential allotment of shares or a rights issue,” Joseph said in an exclusive interview. “Follow-on public offer can be another option,” he said. The bank’s board will discuss the capital raising plan on May 7 tentatively, when it meets to finalise the annual financial accounts. “There was no urgency for the bank to raise capital. But they will have to do it sometime this year,” Vaibhav Agrawal, a stock analyst with Angel Broking said. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/sib-now-weighs-preferential-rights-to-raise-funds/articleshow/12565077.cms)
INSURERS LOOKING AT COVER FOR OUTPATIENT TREATMENT
KOLKATA: With the cost of outpatient treatments (OPD) – including consultation and diagnostics – on the rise, general insurance companies are increasingly looking at providing cover for such treatments. While some companies are offering OPD schemes as add-on covers with the inpatient policy (hospitalisation cover), some others are providing discounts at network hospitals. “Insurance company try to offer this as a service to their customers. This is because unlike life insurance, health insurance policies do not pay you back. So a customer who does not claim anything during a particular year often considers the policy as a waste,” said Mr Neeraj Moorjani, head-product and brand management, Chola MS. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3288561.ece)
BENEFITS OF BUYING A TOP-UP INSURANCE POLICY
A top-up health insurance is a policy taken in addition to the base standard policy. Top-up policies can be issued either as individual or as floater policies. The top-up policy comes into force only when the hospitalisation expenses exceed the threshold limit of the base policy. This limit is called deductible. A deductible is that portion of the claim amount that is not covered by the insurance company and has to be paid by the insured person/insurance company providing the base cover. For example, if the top-up policy is taken for R9 lakh with a deductible of R4 lakh, then the insurance company providing the top-up cover will entertain claims only when the claim amount exceeds R4 lakh and a maximum claim of R5 lakh will be paid by the company. The initial amount of R4 lakh will be paid by the company providing the base cover or it has to be borne by the policyholder himself if there is no base policy. In case of floater top-up policy, the deductible is applied to each individual claim and not in aggregate. (For details log on to : http://www.financialexpress.com/news/benefits-of-buying-a-topup-insurance-policy/933650/)
ING VYSYA LIFE IN TIE-UP WITH AISECT
ING Vysya Life Insurance Company has tied up with Bhopal-based AISECT to provide people in the remote areas access to life insurance as well as services of renewal premium collection to customers of ING Life Insurance. AISECT, which is an education, training, services and e-governance network, has launched a portal to record ING Life transactions being done across AISECT centres.
L&T INSURANCE POLICY GETS AWARD
L&T Insurance’s flagship health insurance policy, my:health Medisure Prime Insurance has been voted the Product of the Year 2012 in the general insurance category. Product of the Year is a global organisation, rewarding innovation in 32 countries through a procedure of consumer voting through face-to-face national survey conducted by Nielsen, a leading global research firm. The policy offers features such as double sum assured for treatment of critical illnesses and coverage of pre-existing diseases after two policy years. – Financial Express
AFTER MFI TURMOIL, CHIT FUNDS THE NEXT BIG DRAW
KOLKATA: Once bitten, but hardly twice shy. After having burnt their fingers in the microfinance sector, you might expect investors there to show restraint. On the contrary, private equity and venture capital (PE and VC) companies are exploring newer, more risky terrain, such as the Rs 35,000-crore chit fund sector. These earlier stakeholders in the MFI sector are now turning to this one. Shriram Chits, with an annual turnover close to Rs 4,200 crore and one of the biggest in the country, has seen queries from a number of PE funds for investment in its business. “We have (also) seen interest from our existing investors in the Shriram Group to invest in our chit fund business,” said Y S Chakravarti, chief operating officer, Shriram City Union Finance, who is also on the board of Shriram Chits. Enquiries, it seems, are pouring in from all quarters. For instance, Lok Capital, a VC firm founded by IDFC’s Rajiv Lall and PE veteran and former Actis head in India, Donald Peck, that was focusing on the microfinance sector, is now actively exploring options to invest in chit fund companies. (For details log on to : http://www.business-standard.com/india/news/after-mfi-turmoil-chit-fundsnext-big-draw/470434/)
SEBI APPROVES MORE QUALIFIED DEPOSITORY PARTICIPANTS
MUMBAI: The number of Qualified Depository Participants approved by SEBI has risen to 21 from 14 in less than a month. Data posted on the regulator’s Web site show the new depositories on CDSL to be: Stock Holding Corporation India, Geojit BNP Paribas Financial Services, Dalmia Securities Private and SMC Global Securities. On NSDL, the new depositories are Globe Capital Market, Stock Holding Corporation of Indiaand Sharekhan. Out of the total 21 QDPs approved by SEBI across the two depositories CDSL and NSDL, only India Infoline, Orbis Financial Corporation, Stock Holding Corporation Indiaand Globe Capital Market are approved as QDP for both the depositories. (For details log on to : http://www.thehindubusinessline.com/todays-paper/tp-economy/article3288540.ece)
VOLUMES CRASH AS TAX GOOGLY STUMPS FOREIGN INVESTORS
MUMBAI: Foreign institutional investors’ (FIIs) interest in Indian equities seems to be waning as the uncertainties surrounding the Budget proposals begin to clear. The first impact was on investments through Participatory Notes (P-Notes) and later on the overall investment climate, which got muddled. As the finance minister and ministry officials started clarifying, FIIs started distancing themselves from the market, leading to a nearly 50 per cent fall in their cash segment volumes. The daily cash market volumes of FIIs were in the range of Rs 6,000-7,000 crore, which has fallen to below Rs 3,000 crore in the last few days, as most preferred to wait and watch before taking fresh positions. Even their overall exposure in the derivatives segment has taken a hit after the expiry of last month’s contract on March 29. Rollovers and open positions have also come down. In the first week after the February 2012 contract expiry, average daily volume in derivatives were Rs 95,000 crore, of which FIIs’ share was 40 per cent. After the expiry of March derivatives contracts, volumes have come down to Rs 77,500 crore, with FIIs’ share down to about 33 per cent. As regards domestic investors staying away, experts say it is largely due to holidays and not the uncertainty over tax proposals. (For details log on to : http://www.business-standard.com/india/news/volumes-crash-as-tax-googly-stumps-foreign-investors/470407/)
UTI MF’S CHARITY FUND DECLARES DIVIDEND
UTI Mutual Fund’s Charitable and Religious Trusts and Registered Societies — an open-ended income-oriented scheme that caters to the investment needs of charitable, religious and educational trusts and registered societies — has declared a dividend of 3.5% or R3.50 per unit on a face value of R100. This payout includes the applicable income distribution tax and the record date for the dividend is March 22, 2012. The objective of the scheme is primarily to provide regular income to its investors by investing not more than 30% of the funds in equity or equity-related instruments and balance in debt and money market instruments.
MIRAE ASSET MF DECLARES DIVIDEND
Mirae Asset Mutual Fund has declared dividend of R1.5 per unit (face value – R10 per unit) in Mirae Asset India Opportunities Fund, an open-ended equity-oriented scheme. The proposed record date of dividend is March 22, 2012, and pursuant to payment of the dividend, the NAV of the scheme (dividend option) would fall to the extent of payout and statutory levy, if applicable. Says Arindam Ghosh, CEO, Mirae Asset Global Investments (India): “We are delighted to announce our third consecutive dividend in three financial years. This is an outcome of our disciplined research-based investment approach and a bottom-up stock selection process that has enabled the fund to build a noteworthy track record since inception.”