Mumbai: Axis Bank’s proposed acquisition of Enam Securities’ businesses has received the final approval from the Reserve Bank of India (RBI). The bank now aims to integrate these operations by the end of the third quarter of this financial year. Initially, Axis will use the Enam brand. A re-branding exercise will be done a few months after the integration.
According to sources, Axis Bank’s consolidated earnings for the October-December quarter, which will be announced in January 2013, are likely to reflect the financial performance of Enam’s businesses.
The third largest private sector bank had announced its plan to buy the equities and investment banking businesses of Enam in November 2010. The structure of the deal had to be reworked after the banking regulator raised some objections.
“The deal has now been cleared by the RBI without any more riders. We need to get approval from the Securities and Exchange Board of India (Sebi), the high court, and also from our shareholders and creditors. We expect this process to be complete and the integration to happen by the end of the third quarter,” a person familiar with the development told Business Standard, requesting anonymity.
It is also learnt that Enam’s co-founder and chairman Vallabh Bhansali will act as an advisor to Axis Securities and Sales, the wholly owned subsidiary of the bank with which the businesses will be merged.
The proposal to induct Bhansali on Axis Bank’s board was withdrawn, following the RBI’s discomfort. The bank had submitted a revised deal structure to the RBI in September 2011.
Sources confirmed that under the revised structure submitted by the bank, the deal would be an all-stock one. Enam’s shareholders will get 13,782,600 equity shares on the basis of the agreed swap ratio of 5.7 shares of the bank for every equity share of the broking firm.
After the transaction, the bank will sell the business to Axis Securities and Sales and receive a “notional” cash consideration of close to Rs 274 crore, which represents the book value of Enam’s businesses. The businesses that will be merged include investment banking, institutional equities, retail equities and related operations such as the distribution of financial products.
The deal value includes Axis Bank’s right to use the Enam brand. “We’ll be using it initially after the integration. Any re-branding exercise will happen only a few months after the integration,” said a source.
RBI ISSUES NORMS FOR AIRLINES RAISING ECB FOR WORKING CAPITAL
MUMBAI: The Reserve Bank of India (RBI) has issued the details on its announcement of last Thursday allowing airline companies to tap external commercial borrowing (ECB) for working capital needs. The overall ECB limit for the sector is $1 billion and for an individual company, $300 million, RBI said on Tuesday. Finance Minister Pranab Mukherjee’s budget speech had said Indian carriers would be allowed to borrow for working capital from foreign banks. Airlines have welcomed the move, as it could make available loans at cheaper interest rates. However, analysts are cautious whether airlines would be able to, considering their troubled financial health. RBI has mandated that a company should raise this foreign debt within 12 months. The minimum average maturity can be three years. “ECB will be allowed to the airline companies based on cash flow, foreign exchange earnings and its capability to service the debt,” it said. (For details log on to : http://www.business-standard.com/india/news/rbi-issues-norms-for-airlines-raising-ecb-for-working-capital/472504/)
FINANCIAL INCLUSION SHOULD BE A BANK-LED MODEL: RBI
MUMBAI: A top official of the Reserve Bank of India (RBI) said banks are in a better position as compared with other entities to lead the financial inclusion goal in India, though mobile companies have been allowed to partner them. “Our experience shows that the goal of financial inclusion is better served through mainstream banking institutions as only they have the ability to offer the suite of products required to bring in the effective or meaningful financial inclusion,” said RBI Deputy Governor K C Chakrabarty in a speech delivered in Washington, DCon Sunday. The speech was released on the central bank’s website on Tuesday. Under the three-year financial inclusion drive, banks have covered all villages with population more than 2,000 by March 2012 and are working towards reaching out to all villages in a time-bound manner. (For details log on to : http://www.business-standard.com/india/news/financial-inclusion-should-bebank-led-model-rbi/472503/)
GOVT BOND AUCTION MIGHT SHIFT FROM FRIDAY TO MONDAY/TUESDAY
MUMBAI: The Reserve Bank of India (RBI) is considering advancing the day bond auctions are conducted, to reduce volatility in the market amid the high government borrowing plan. At present, such auctions are conducted on Fridays; this might be shifted to earlier in the week, to Monday or Tuesday. “There have been some talks on rescheduling the auction day, but some issues were raised by the Fixed Income Money Markets and Derivatives Association. They are being followed up,” said a senior executive heading the treasury operations of a European bank in India. Market participants said the move would be helpful, as the cut-off yields from the auction would be available earlier in the week. “If you do it (auction) on a Monday or Tuesday, it gives you more time to digest the rates, rather than on a weekend after which markets are shut and you are not sure if something happens in the global markets,” added the official. “The cutoff levels in an auction on an earlier day (in the week) could set the mood for the rest of the week,” said a senior treasury official from a large public sector bank based in this city. (For details log on to : http://www.business-standard.com/india/news/govt-bond-auction-might-shiftfriday-to-mondaytuesday/472524/)
HIGHER RATES, SLOW GROWTH HIT LOAN REPAYMENTS: FM
NEW DELHI: High interest rates and slow economic growth in 2011 have adversely affected the repayment capacity of borrowers, finance minister Pranab Mukherjee said on Tuesday. “Increase in interest rates and slowing economic growth during 2011 have adversely impinged on the repayment capacity of all categories of borrowers, especially small and medium enterprises,” said Mukherjee said in a reply to the Rajya Sabha. Most of the public sector banks registered a rise in non-performing assets as they switched to system based recognition of NPAs in June-September, 2011 quarter, he said. The minister said banks could restructure such accounts if it is done within the Reserve Bank’s framework. “However, in case restructuring is done outside RBI’s framework, the asset classification benefit is not available to the banks,” Mukherjee said. (For details log on to : http://www.financialexpress.com/news/higher-rates-slow-growth-hit-loan-repayments-fm/941009/)
IDBI TO DOUBLE BRANCH NETWORK IN SIX YEARS
MUMBAI: Public sector lender IDBI Bank plans to double its branch network to 2,000 offices (branches) in the next six years, gathering more retail business. It morphed into a commercial bank in 2004 from a development finance institution. It remains a largely wholesale bank, with the corporate and commercial segments making up a little over 60 per cent of its business. It had only 442 branches in 2006-07; this grew to 973 in 2011-12. While it intends to reinforce the wholesale side, the idea is to prune the share of corporate banking to 50 per cent by 2015-16. The credit extended grew 15.3 per cent to Rs 1,81,158 crore in 2011-12. Chairman and Managing Director R M Malla said it had followed a calibrated policy of growing the loan book by 15 per cent yearly since 2010-11, focusing on improving the profitability. The bank expects to expand loans by another 15 per cent in 2012-13. (For details log on to : http://www.business-standard.com/india/news/idbi-to-double-branch-network-in-six-years/472525/)
SBI TO CUT SME LOAN RATES BY 150-200 BASIS POINTS
MUMBAI: State Bank of India (SBI), the country’s largest lender, will reduce interest rate on loans given to small and medium enterprises by 150 to 200 basis points (bps) by the end of the month. The lender has already reduced auto loan rates by 75 bps and retail deposit rates by 25-100 bps. News agency Reuters reported quoting SBI chairman Pratip Chaudhuri saying such a deep rate cut will not erode its margins. Though the lender has not reduced the base rate — the benchmark rate to which all loans are linked — it has reduced the spreads that it charged over the base rate. SBI’s base rate is at 10 per cent. Most public sector lenders and ICICI Bank — the largest private sector lender — have reduced base rate. Two Mumbai-based public sector banks on Tuesday announced reduction in base rates. While Union Bank of Indiaannounced a cut of 15 bps, Central Bank of Indiareduced it by 25 bps. Both the lenders have the base rate at 10.5 per cent now, at par with some of their peers such as Punjab National Bank and Bank of Baroda. The new rates will be effective from May 1. (For details log on to : http://www.business-standard.com/india/news/sbi-to-cut-sme-loan-rates-by-150-200-bps/472502/)
CORPORATION BANK, UNION BANK, CENTRAL BANK CUT BASE RATES
MUMBAI: Union Bank of Indiaand Corporation Bank are latest to trim their base rates by 15 basis points to 10.50%. On other hand, Central Bank of Indiaon Tuesday reduced its base rate by 25 bps to 10.5%. Most banks now have a base rate of 10.50% except banks like State Bank of Indiaand some private sector banks. Last week, ICICI Bank had cut its base rate by 25 basis points to 9.75%, whereas Punjab National Bank (PNB) and Bank of Baroda (BoB) had cut their base rates by 25 basis points to 10.5%. “We want to align our base rate with our peers in the PSU space and we have always passed on the benefits through a base rate to our customers,” said SS Mundra, executive director of Union Bank of India. The bank has reduced the deposit rates in the short maturities by 15-25 bps and in the long maturities by 25-40 bps. (For details log on to : http://www.financialexpress.com/news/corporation-bank-union-bank-central-bank-cut-base-rates/941004/)
LIC CAN PICK UP OVER 10 PER CENT STAKE IN COMPANIES, CLARIFIES FINANCE MINISTRY
NEW DELHI: India’s biggest investor in equities, the Life Insurance Corporation of India, or LIC, can pick up more than 10% equity in companies against the sector rules set by the insurance watchdog as it is governed by a separate law, a finance ministry official has clarified. The insurer’s high stakes in the many companies had raised concerns after it picked up 4.4% equity in ONGC in the recent government auction, taking its total stake in upstream oil major to 9.5%. The insurance watchdog, Insurance Regulatory and Development Authority (IRDA), had in 2008 amended investment norm that prohibit an insurer from having more than 10% stake in a company. LIC is governed by a separate law, the Life Insurance Corporation Act, 1956, that allows the insurer to acquire up to 30% equity in companies after prior government approval, the official told ET. (For details log on to : http://economictimes.indiatimes.com/news/economy/finance/unlike-others-lic-can-pick-up-over-10-per-cent-stake-in-companies-clarifies-finance-ministry/articleshow/12859536.cms)
HOUSE PANEL RAPS LIC FOR ONGC SHARE BUY
NEW DELHI: Life Insurance Corporation’s (LIC’s) purchase of Oil and Natural Gas Corporation (ONGC) shares during the government’s part-divestment of its holding has come under fire from a parliamentary panel. The Standing Committee on Finance has questioned government-owned LIC’s acquisition and asked the Insurance Regulatory and Development Authority (Irda) to inquire if the company had breached investment norms while buying the shares during the government stake auction. The report of the panel, headed by former finance minister Yashwant Sinha, was tabled in Parliament on Tuesday. “The committee cannot but conclude that the objective of disinvestment has been reduced to merely deficit-bridging,” goes its rap on one state-run firm’s equity being bought by the other. The report says it regrets the government using central public sector enterprises (CPSEs) as a “milching cow”. (For details log on to : http://www.business-standard.com/india/news/house-panel-raps-lic-for-ongc-share-buy/472523/)
TATA AIG GEN LAUNCHES RENEWABLE REIMBURSEMENT PLAN ‘MEDIPRIME’
MUMBAI: Private insurer Tata AIG General Insurance today launched its first domestic lifetime renewable reimbursement health insurance policy, MediPrime. “MediPrime is specifically designed to meet the current requirements of the consumer and ensure their needs from a health policy are met,” Tata AIG Managing Director and CEO Gaurav D Garg said here. This plan is a comprehensive offering and is designed to cater to the retail consumers, he said. MediPrime has features like no sub-limit for in-patient hospitalisation, total reimbursement or no co-pay and ayush benefit that is coverage for non-allopathic in-patient treatments like ayurvedic, unani or homoeopathy. Co-pay means that out of the total billed amount, the patient is required to pay certain per cent. (For details log on to : http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/tata-aig-gen-launches-renewable-reimbursement-plan-mediprime/articleshow/12852088.cms)
INDIA FACTORING & FINANCE SOLUTIONS PVT LTD EXPANDS ITS FACTORING SERVICES IN MAHARASHTRA
PUNE: India Factoring & Finance Solutions Pvt Ltd, a joint venture of the state-owned Punjab National Bank (PNB), Malta-based FIM Bank Group, Italy-based Banca IFIS, and Blend Financial Services, Mumbai, is expanding its factoring services in Maharashtrafor entrepreneurs, small and medium enterprises (SMEs) and small-scale industries. The company will soon starts services in like Pune, Nashik, Nagpur, Aurangabad, a company executive said. Factoring is a financial transaction where a business sells its accounts receivable for immediate cash to a third party referred to as the ‘factor’. The factor finances the receivables, administers the debt and later collects it’s at the due date. In a simple sense, if an SME has raised an invoice on its customer with a credit period of 60 days, the SME will sell the invoice to the factor and realise the due amount immediately. The factor will collect the money from the SME’s customer at the end of the credit period. (For details log on to : http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/india-factoring-finance-solutions-pvt-ltd-expands-its-factoring-services-in-maharashtra/articleshow/12851390.cms)
SMALLER MUTUAL FUNDS FEEL NEGLECTED, MURMURS OF DISSOCIATION FROM AMFI MAKE ROUNDS
MUMBAI: Small and mid-sized mutual fund houses have raised questions at the functioning of their industry body – Association of Mutual Funds in India(Amfi). They allege is decision making process is tilted towards the sector’s top players, which they termed “irrational and dangerous”. Though the smaller players have been unhappy with Amfi for quite some time, the latest trigger for their angst is the industry body’s plan to stop payment of upfront commissions to distributors selling equity products. During interactions with Business Standard, more than half a dozen industry chief executives even went to the extent of saying that if the impact of big players continues unabated, they would prefer to move out from Amfi and form a parallel body. They admit that under H N Sinor, chief executive officer (CEO), there have been improvements but add they continue to feel neglected as their concerns are not heard. (For details log on to : http://www.business-standard.com/india/news/smaller-mfs-feel-neglected-murmursdissociationamfi-make-rounds/472487/)
SPECIAL SESSION FAILS TO BRING ZEST TO GOLD ETFs ON AKSHAYA TRITIYA
MUMBAI: Trading in gold exchange traded funds (ETFs) on Akshaya Tritiya was sluggish in the early part of the day but picked up pace during the special extended session on both the national stock exchanges, NSE and BSE. The buying frenzy seen during last year’s festival was, however, missing. “The response in the morning session was a bit muted but the volumes picked up during the special session,” said Sarath Sarma, executive director, IDBI Asset Management. Added Rajnish Rastogi, senior fund manager & co-head – equities, Motilal Oswal AMC: “We have seen significant interest from investors and have been surprised with the volume of trade in our ETF.” The turnover in gold ETFs on the NSE stood at R53,011 lakh as of 6:55 Indiatime, as per the exchange’s website. (For details log on to : http://www.financialexpress.com/news/special-session-fails-to-bring-zest-to-gold-etfs-on-akshaya-tritiya/941038/)
IDBI MUTUAL FUND LAUNCHES ‘INDIA TOP 200 EQUITY FUND’
MUMBAI: IDBI Mututal Fund today announced the launch of its second fund in the equity segment named ‘IDBI India Top 200 Equity Fund’, which will be opened for subscription on April 25. Subscription for the new fund offer (NFO) will close on May 9 and will reopen for sale and repurchase from May 22 onwards, a top company official said. “Our bouquet of investment options comprise of index-based equity funds as well as gold and debt products. We now bring a diversified, actively manage equity fund to present a long-term investment opportunity in the current equity market,” IDBI Asset Management Managing Director and Chief Executive Officer Debasish Mallick told reporters here. (For details log on to : http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/idbi-mutual-fund-launches-india-top-200-equity-fund/articleshow/12851458.cms)
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