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15-Apr_2011 - Money Mantra Magazine


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                                                                                                                        EDITOR’S NOTE

                                                                 you fish in
        Year : 02
                               Issue : 35

                                                                     You must have witnessed several stocks breaking down due to breaking news.
        EDITORIAL TEAM                                           Satyam, Ranbaxy, LIC Housing, RADAG stocks, Reliance Industries, Shri
        Alok Dwivedi, Sub Editor cum correspondent               Ashatavinayak tanked due to adverse news flows. All of us get tempted to buy
        Harish Kumar, Sub Editor cum correspondent               the distressed stocks. Some are able to gather courage for such a bold move,
        Kailashpati Mishra, Senior correspondent
        Prakash Priyadarshi Jr. Sub Editor                       while some prefer to stay away. Is there some way to decide whether to pounce
                                                                 upon the crashing stock when others are treating it like untouchable? I feel so.
        GRAPHIC DESIGNER                                             If the stock belongs to a trusted group/company, it may be considered pos-
        Harikrishan Pal                                          itively. Suppose, there is a sudden decline in some biggies like Tata Steel due
        Arun Sharma
                                                                 to adverse news flow, it will be an opportunity to buy the stock provided the
        PHOTO                                                    fundamentals of the company suit you. Because you trust its robustness.
        Ravi Girota                                                  News flows may be classified into two categories: those related to corpo-
                                                                 rate governance and others related to financials of the company. Financials of
                                                                 the company don't change overnight. News related to corporate governance
        K K Pandey
        8860609250                                               failure like tax evasion, financial fraud etc are sudden and unexpected. Its sud-
                                                                 den nature and non-verifiability jolts the stock heavily. What to do in such a
        PRODUCTION                                               scenario? If the stock is of a PSU, one may start buying it in small lots. PSUs
        Deepak Rastogi
                                                                 follow robust guidelines and there is little room for system failure. Even if
        ADVERTISEMENT                                            there is some failure, it will be at local level due to some greedy official, which
        Sunil Parchha                                            may hardly impact the financials of the company in a big way. If at a later
        09953402555                                              stage, the lapse is diagnosed as system failure, the government is always there
        Subhash Chowdhary
                                                                 to rescue it out. Recent case of LIC housing finance testifies it.
        Yashwant Kumar                                               Take the case of companies like Reliance Industries. Of late, there has
        08860609213                                              been a stream of adverse news flow for the company. Be it imposition of penal-
                                                                 ty by SEBI or revision of gas output projections, the stock tumbled just for a
        C- 125, Sector- 19                                       day or two and recovered thereafter. The advantage of being big. You may
        Noida, Uttar Pradesh                                     cash upon such blows to the stock. Take the case of reliance communication.
        Email: editor.moneymantra@gmail.com                      CBI is investigating the company into the 2G scam. The day Anil Ambani vis-
        Phone: 0120- 4710700
        Fax: 0120-4710728                                        ited the CBI headquarters, the stock started moving up. Investors believed that
        www. moneymantra.co.in                                   the management will leave no room to boost the prospects of the company.
                                                                 The group has 'jugaad' at higher levels. Thus the robustness of 'jugaad' system
                                                                 becomes an important factor. Those who overlooked this are grappling with huge
                                                                 losses in Shri Ashtavinayak stock. DB Realty of Shahid Balwa had good
                                                                 prospects until its link with Dawood came to the fore. It commands excellent
                                                                 'jugaad' mechanism. But lethal link with D-Gang has marred its prospects.
        Published by Jyoti Narain for                                To sum it up, fishing in troubled water is rewarding if you are confident about
        Pearls News Network Pvt. Ltd.from C-125,
        Sector- 19, Noida, Uttar Pradesh and Printed at          the fundamentals of the company, its corporate governance mechanism and
        New Print India Pvt. Ltd. 8/4B, Site-IV, Industrial      robustness of its 'jugaad' system. Take the example of financial technology group.
        Area, Sahibabad, Gzb, (U.P.) 201010                      It has sound fundamentals, pro-active management and good corporate gover-
        Disclaimer: Money Mantra is a personal finance           nance structure. But lack of 'jugaad' at higher level has blocked the prospects
        magazine and the financial solutions provided by         of the company. In this issue, we have identified those beaten down stocks of
        different experts in this magazine are only sug-
        gestive in nature. Readers should take advice
                                                                 BSE 100 which are trading at a discount to their book value. Their prices are
        from their financial advisors before taking a final      making new lows (lower than that of 2007-08 recession days). We have tried
        call. In no case, Money Mantra team or manage-                                           to identify, whether there is any steam left in them.
        ment can be held responsible for financial loss                                          Whether one should accumulate them or throw
        caused to readers.
                                                                                                 them into dustbin? Read on.
                                                                                                      With best wishes,
EP-3-19akm.qxd   3/29/2011   1:59 PM   Page 2


           April 1-15, 2011
                                                                         News Track
                                                                         08 New guidelines likely for wealth
                                                                            management industry

            Volume 35
                                                                         08 SEBI permits listing of securi-          Stock & Commodity Mutual fund
                                                                            tised debt instruments
                                                                                                                     20 Worries continue, gold                 54 Now, invest in Gold via
                                                                         08 Guidelines soon for investment
                                                                                                                     has further room to rise                  SIP
                 ON THE COVER                                               of foreign investors in mutual
                                                                            funds                                    As factors like geopolitical tensions,    Reliance and Kotak MF have come up
                                                                                                                     inflationary worries and sovereign cri-   with gold funds which offer SIP facili-
                                                                         09 IRDA plans permitting insurance

                 HOPING AGAINST HOPE                                        companies to trade in F&O
                                                                         09 IRDA goes for more disclosures
                                                                                                                     sis concerns remain intact; the yellow
                                                                                                                     metal is likely to move northwards.
                                                                                                                                                               ty and don’t require demat account for

                 Year 2011 has not been well for Indian markets.                                                     24 Signs of resilience, col-
                 Indices have lost over ten per cent so far this year.                                               lect quality stocks on dips
                                                                                                                                                               56 Commission earned by
                                                                                                                                                               MF distributors
                                                                                                                                                                                                            Consumer Watch
                                                                                                                     Equity markets are showing signs of       Market regulator SEBI has said that the
                 Many giant stocks are bleeding and are available at                                                 resilience since the beginning of                                                 66 Don’t cover up
                                                                                                                                                               distributor has to inform the investor
                 cheaper rates. Even a few of them are trading below                                                 March. Hence, investors should buy        about the commissions they receive      to get a cover
                                                                                                                     quality stocks at lower levels.                                                   Insurance company or its agent
                 their book values. What are the reasons behind this                                                                                           from mutual funds.
                                                                                                                                                                                                       should not hide any information per-
                 appalling situation? Is it right time to accumulate                                                 50 Open offer: Opens                                                              taining to the policy or its terms and
                 them at current levels? Our cover story delves into                                                 doors to wealth
                                                                                                                     There are many such players in share
                                                                                                                                                               Insurance                               conditions while selling the same.
                 the matter.                                                                                         markets who only deal in open offers
                                                                         09 Long wait at SEBI counter
                                                                         10 Cabinet approves PFRDA bill
                                                                                                                     to make quick bucks in very short         58 Insurance Policies:                       News Analysis
                                                                                                                     span of time.                             Falling prey to misselling
                                                                         10 Insurance company can’t deny                                                       It is unfotunate but true that most of       14 The great roll back
                                                                            claims on frivolous grounds              Scrips on Radar                           the customers end up buying wrong            Union finance minister has addressed
                                                                         10 RBI to get more powers                                                             policies in order to fulfill their need to   a few concerns to the earlier budget
                                                                         11 Trade into Nasdaq now                    26 Blue Star                              save tax.                                    proposals made during budget
                                                                                                                     Blue Star has strengthened its product                                                 speech.
                                                                         11 Union Bank offers Money Power
                                                                                                                     portfolio by buying companies and                                                      18 One more step
                                                                         11 Multi currency remittance facility
                                                                            from IDBI Bank
                                                                                                                     these acquisitions have enabled it in
                                                                                                                     completion of projects.
                                                                                                                                                               Taxation                                     towards GST
                                                                         12 IT Department gets more                                                                                                         GST will not only eliminate the mul-
                                                                            humane                                   27 M&M                                    62 Finance bill and Real                     tiple layers of taxation, but also fetch
                                                                         12 Karnataka Bank to cover villages         Recently Mahindra and Mahindra has        Estate Sector                                nearly $15 billion per year for Indian
                                                                                                                     completed all formalities regarding       As far as Finance bill 2011 is con-          government after its implementation.
                                                                         12 SBI to recruit 20000 employees                                                     cerned, it is a mixed bag of proposals
                                                                                                                     acquisition of SsangYong Motors.
                                                                         13 Bank on Bike from SBBJ                                                             for real estate sector in the country.
                                                                         13 More products for the elderly            28 SKF India                                                                            16 Japan tremors shake
                                                                         13 Idea and Axis Bank launch My             SKF India has planned to boost its                                                      the world
                                                                                                                                                               64 Document Identification
                                                                            Cash                                     capex for the year and ramp up opera-                                                   After disaster, Japan’s economy is
                                                                                                                     tions at its three units.
                                                                                                                                                               Number- Junked                                likely to slow down in first half of the
                                                                                                                                                               Budget 2011 has proposed to introduce         year, but construction driven recovery
                                                                         Wealth Management                           29 Punjab National Bank                   a computer based system of allotment          may take place in the later
                                                                                                                     PNB’s dominant presence in Northern       and quoting of DIN in each correspon-         part of 2011.
                                                                         68 Do not forget to plan for                                                          dence sent or received.
                                                                                                                     India offers the bank a structural
                                                                         emergencies                                 advantage over peers.
                                                                         Siksha, a married working lady, wants
                                                                         to buy a house of Rs.80 lakhs. The take     30 ICICI Bank
                                                                         home salary of this couple is Rs.80000      Asset quality of the bank has showed
                                                                         per month. Their son has recently start-    further improvement in the third quar-
                                                                         ed going to a premier school.               ter of current fiscal.

                                                                         69 Plan well in advance for                 31 Bajaj Auto
                                                                         children’s education                        BAL has planned to launch a new dis-
                                                        38               Krishnamurthy and Shanti, a working
                                                                         couple, has two children. They visit a
                                                                                                                     cover by April 2011 and two more
                                                                                                                     models could be launched around
                                                                         financial planner for planning related to   Diwali this year.
                                                                         their children’s educational expenses.
EP-3-19akm.qxd    3/29/2011       1:59 PM          Page 4

                                                                                                                                                                                                                                             Cartoon Mantra
           READER                   Mail
                                                                         Money Mantra budget special provided a                                                                                                          Doubtful generosity
                                                                         complete picture of general budget of the                                                                                                       Income tax department has suddenly become gen-
                                                                                                                                                                                                                         erous towards the common man. It says that it won't
                                                                         union government. Opinion of the experts like                                                                                                   harass those small taxpayers whose gross annual
                                                                         DC Gupta and SS Khan made it all the more                                                                                                       income is less than Rs 10 lakh. Mind it, for income
                                                                         worthy. 'Impact of budget on wallet' by Arnav                                                                                                   tax department, a person having a gross annual
                                                                                                                                                                                                                         income of less than 10 lakh is a 'small' tax payer.
                                                                         Pandya had lots of useful information. Sectoral                                                                                                 Such taxpayers won't be subjected to computer
                                                                         analysis was marvellous. Had you taken the                                                                                                      added scrutiny system (CASS). These will be scru-
                                                                         opinion of a few more brokerage houses on                                                                                                       tinised if and only if the department has credible
                                                                                                                                                                                                                         information against them. Income tax bonanza for
                                                                         sectoral picks, it would have been better.                                                                                                      senior citizens (which started with budget speech
                                                                         Budget cartoons were a good compilation. It                                                                                                     of finance minister Pranab Mukherjee) continues
                                                                         would be unfair to appreciate your cover issue.                                                                                                 unabated. The department has said that except
                                                                                                                                                                                                                         rare cases, it won't touch the tax returns filed by
                                                                         (Sir or it should be that It would be unfair not to                                                                                             senior citizens above the age of 60 years. Is income
                                                                         appreciate your cover issue.) It was very much                                                                                                  tax department acting smart to trap the small tax-
                                                                         visible at the cover page that Finance Minister                                                                                                 payers? Beware.
                                                                         had sacrificed the welfare of common man at
                                                                         the altar of growth. The baby of growth has
                                                                         come out well.
                                                                                                                                             “   Negotiation at its best
                                                                                                                                                 Finance Minister Pranab Mukherjee is a celebrated negotiator and a
                                                                                                                                                                                                                                A die-hard follower
                                                                                                                                                                                                                                of Morarji
                                                                                                                                                 star bargainer. He knew how to satisfy the industrial
                                                                                                                    -Payal , by e-mail           lobbyists post budget. The budget provision to                                 CBI is a die-hard follower of former prime
                                                                                                                                                 levy service tax on 25 plus bed air condi-                                     minister Morarji Desai. Whenever it finds
                                                                                                       Losing relevance                          tioned hospitals and pathological                                              difficulty in extracting information from
                  Include politics                                                                                                               tests became an eyesore of the                                                 the accused, it follows the urine therapy.
                      I have been reading your mag-                                                        Refer to MM dated 31st March          general public as well as the                                                  Morarji used to treat the incurables (dis-
                  azine since its first issue hit the                                                  2011. It touched upon all the aspects     industry. All the lobbyists got                                                ease) with urine. He had given urine a clas-
                  stands. I'm a witness to all the                                                     of union budget. I liked the edit in      trapped in this provision and                                                  sical sanskrit name shivambu. Let us now
                  changes you have made in the mag-                                                    particular. The way the editor has        the finance minister prom-                                                     come back to CBI. When some accused
                  azine in the last one year. Therefore,                                               tried to prove that the union budget      ised to have a re-look at the                                                  person refuse to budge, CBI cages him
                  I decided to compare the budget                                                      has lost relevance during the years       same. Lobbyists became                                                         in a hot humid environment. And when the
                  issue of last year with current issue                                                is quite convincing. I feel that the      happy at their success.                                                        profusely sweating person asks for a
                  (dated 31st March 2011). I'm not a                                                   monetary policy of RBI and deci-          Finance ministry insiders say                                                  towel, he is given a urine soaked towel
                  journalist and don't find myself                                                     sions of SEBI have more strength          that this provision was a ploy                                                 to wipe his face. In winter days, when a
                  competent enough to analyse media                                                    than the union budget. At least they      to divert attention from other                                                 high profile accused requests for a blan-
                  matters. Still as a reader, I can say                                                stick to their decisions, put the deci-   provisions and it worked. After                                                ket, he is given a urine soaked stinking
                  it with confidence that your maga-                                                   sions to proper implementation and        all experience counts.                                                         blanket. These non-intrusive gimmicks of
                  zine has covered annual general             Bonanza for seniors                      reason out the logic behind their                                                                                        CBI have worked wonders and some
                  budget better than your competitors.             Pranab Da is a smart politician.    decisions. In contrast, union budg-                                                                                      accused have even turned approver in a
                  I would like to suggest one more            He knew how to please the politi-        et enumerates provisions without          It's confidential!                                                             few cases. It's said that some high pro-
                  addition in budget issue i.e. political     cians of all hues. After all, what is    any solid footing; the provisions         The term 'confidential', 'secret' and 'top secret' have lost their sanctity.   file people who were arrested in the 2G
                  compulsions and lobbyists' influ-           common between prime minister            made in financial bill are sometimes      In a bizarre case of irresponsibility, enforcement directorate couldn't        scam were coerced into going for shi-
                  ence on budget. Some media hous-            Manmohan Singh and BJP stalwart          reversed as well. Even if these get       get the tax evader Hasan Ali on remand due to 'confidential' documents         wanbu paan (to sip urine).
                  es have tried their hands on these          LK Advani. Both qualify for senior       passed, proper implementation is a        submitted to the Bombay High Court. The court observed that some parts
                  two issues but the treatment has been       citizen category. Advani ji is already   far cry. Government hardly meets                                              of the so-called 'confidential' docu-
                  superficial so far. In a country like       80 and Dr Singh will touch the fig-      the deficit figures it announces in                                                   ments were easily available on
                  India, where politics has a major role      ure in the year 2012. Therefore, the     budget document. The influence of                                                       wikipedia. This observation
                  to play in economic decision mak-           finance minister chose to shower tax     lobbyists and industry chambers in                                                         has exposed the 'secret'
                  ing, one should not hesitate to             exemptions on this duo. May be, he       the making of budget is well known.                                                          working style of our
                  include political compulsions of            is offering golden handshake to both     It is high time government stops                                                               financial intelligence
                  economic decision making. It will           these veterans.                          fooling the common man.                                                                         agencies. Anyway,
                  add to your readership.                                     -Padma, Kolhapur                            -Harit, by e-mail                                                             the        Supreme
                           -Kishore Vyas, New Delhi                                                                                                                                                      Court came to
                                                                                                                                                                                                          the rescue of
                                                                SEND YOUR LETTERS & EMAIL:
                                                                                                                                                                                                          directorate and
                                                   Address: Editror, Money Mantra C- 125, Sector- 19 Noida                                                                                                 cancelled the bail
                                                            Email: editor.moneymantra@gmail.com                                                                                                            application of
                                                                                                                                                                                                           Hasan Ali Khan.
           6     MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                               1-15 April, 2011   MONEY MANTRA   7
EP-3-19akm.qxd    3/29/2011       1:59 PM          Page 6

           News Track
                                                                                                                                                      IRDA for high solvency..                                   BUFFETT SINGS CHARITY MANTRA
           Wealth Management serv-                                                                                                                    IRDA on has directed the general insurance
                                                                                                                                                      companies to augment the Indian Motor Third

           ices to be regulated jointly                                                                                                               Party Insurance Pool (IMTPIP) reserves to
                                                                                                                                                      maintain a solvency ratio of 150 per cent by
                                                                                                                                                      March 2014 from the present 126 per cent in
                                                                                                                                                      order to meet the cost of higher compensation
                   eserve Bank of India and cap-            in detail. According to the RBI, the        size of wealth management business.           to be paid to road accident victims. The author-

           R       ital     markets    watchdog
                   Securities Exchange Board of
           India are likely to implement new
                                                            committee deliberated on regulatory
                                                            issues relating to wealth manage-
                                                            ment/private banking undertaken by
                                                                                                        SEBI has highlighted the need to take
                                                                                                        up joint efforts and to improve coor-
                                                                                                        dination both at the operational as also
                                                                                                                                                      ity has allowed the companies to raise the pool
                                                                                                                                                      to the prescribed solvency ratio in a gradual
                                                                                                                                                      manner: to 137 per cent by March 2012 and to
           guidelines for the $1-trillion wealth            banks. Select banks had been asked          the surveillance level, between differ-       145 per cent by March 2013 before achieving
           management industry. The regulators              to share details of their wealth man-       ent regulatory agencies to protect the        the ratio of 150 per cent by March 2014. The
           would likely take up the implemen-               agement businesses. They were asked         interests of investors in an increas-         same ratio has to be maintained afterwards.
           tation of the regulations on a joint             to state their policy, procedures and       ingly complex world of finance.               Besides, IRDA has asked the companies to
           basis. They will also keep an eye on                                                                                                       maintain the solvency ratio at a minimum of 130
           violations. No specific regulations for          NOKIA E7 REACHES INDIA                                                                    per cent for all lines of businesses by the end
           wealth management for high net-                                                                                                            of March this year.
           worth individuals (HNIs) have been
           framed as yet and they come under
           norms for portfolio management by                                                                                                          Long wait at SEBI counter                                  Billionaire investor Warren Buffett arrives at the Bangalore airport.
           the SEBI. Currently they are being                                                                                                              About 230 entities are awaiting SEBI approval
           regulated by various regulators as per                                                                                                     for operating as stock broker or trade clearing mem-
           the sectors in which they are offering
           their services and according to an offi-
                                                                                                                                                      bers of various stock exchanges, with some appli-
                                                                                                                                                      cations pending for more than a year. Most of the
                                                                                                                                                                                                                   Technical analyst in trouble
           cial, there are no comprehensive rules                                                                                                     long-pending applications are stuck due to addition-      SEBI is mulling action against the firm Ashwani Gujral Investment
           to regulate the wealth managers for                                                                                                        al explanations and clarifications sought by the reg-     and Portfolio Management Pvt Ltd (AGIPM) run by technical ana-
           services across various sectors, such                                                                                                      ulator to conduct necessary due diligence on enti-        lyst Ashwani Gujral reported Indian Express. It is alleged that
           as banking, markets, insurance, com-                                                                                                       ties wanting to trade in the market. In some cases,       AGIPM has been offering portfolio management services (PMS)
           modity and pension funds.                                                                                                                  explanations have been sought from the stock              without obtaining prior SEBI approval. As per preliminary find-
                The government has pooled in its                                                                                                      exchanges, whose trading or clearing memberships          ings of SEBI, AGIPM was offering various investment schemes
           various regulatory resources and the                                                                                                       have been sought by the interested parties. The           such as 'Managed Future Service', 'Managed Nifty Options Service'
           government has framed a comprehen-                                                                                                         pending cases include 104 applications for stock          among others, which, according to SEBI, were in nature of PMS.
           sive rule-book for wealth manage-                                                                                                          broker licence in the cash equity segment of vari-        The regulator is also looking at whether the firm had violated SEBI
           ment practices. Inputs towards these                                                                                                       ous bourses. Besides, 131 applications are pend-          (Stock Brokers and Sub Brokers) Regulations. The company had
           were sought from RBI, SEBI and                                                                                                             ing for operating in equity or cash derivative seg-       solicited funds from investors by stating on its website,"We have
           other financial sector regulators. The                                                                                                     ments of various bourses, as per the information          a franchisee of a reputed brokerage house." SEBI norms state
           first meeting of the sub-committee of                                                                                                      compiled by SEBI as on February 28. In normal cir-        that only a sub-broker registered with the regulator can act on behalf
           the Financial Stability Development               Nokia India VP and MD D Shivkumar launched Nokia E7 smart phone in New Delhi. Nokia      cumstances, SEBI grants registration or replies to        of a stock broker as an agent for assisting the investors in buy-
                                                             India brand ambassador Shahrukh Khan was also at the function.
           Council (FSDC) discussed this issue                                                                                                        the application within 30 days of application.            ing, selling or dealing in securities through such stock brokers.

           NEWS BRIEF
           SEBI permits listing of..                 Investors encashed on typo error of SEBI Investment guildelines soon                             IRDA to take a call on..                      Insurance companies in F&O                     IRDA for more disclosure
           SEBI has allowed the listing of secu-     The Cairn Energy stock rose 1.81% to 438.70            SEBI will soon come out with guide-       IRDA is examining the proposal from           IRDA plans to permit insurers to trade in       Concerned over the rampant mis-
           ritised debt instruments on               pence from 430.98 pence on 15th March 2011 on          lines for foreign investors undertaking   Reliance Life Insurance to rope in            equity futures and options contracts,           selling of guaranteed products -
           exchanges with effect from 17th           the London Stock Exchange on media reports that        direct investments in mutual funds. "     Japanese insurer Nippon Life Insurance        which will help the companies protect           especially net asset value (NAV) ones
           March 2011.in order to boost debt         SEBI had approved the open offer document filed        We are working with the Reserve           as a strategic partner with 26 per cent       returns from equity-linked products             - of life insurance companies, IRDA is
           market. Securitisation involves pool-     by Vedanta Resources for buying more shares of oil     Bank and the Finance Ministry (for        stake. Nippon Life has signed an agree-       against sharp stock market declines.            pushing for greater disclosure on
           ing of financial assets and the           explorer Cairn India. But SEBI said it was a typo-     allowing FIIs entry into mutual           ment with Reliance Capital, of which          The proposal, currently being vetted, will      these products. "The data must be
           issuance of securities that are re-       graphical mistake on its part. Shares of the Indian    funds)...it is a matter of weeks and      Reliance Life is a wholly-owned subsidiary,   be evaluated by IRDA's internal commit-         provided separately for NAV-guaran-
           paid from the cash flows generated        unit of the British utility closed at Rs 346.20, up    not months," SEBI Executive Director      to acquire 26 per cent stake for Rs 3,062     tee on investments. Initially, only unit-       teed and other products (both for
           by these assets. Common assets            1.48%, on the Bombay Stock Exchange. Vedanata          of institutional investment manage-       crore. The draft guidelines states that the   linked insurance products, or Ulips,            existing and withdrawn), which are in
           for securitisation include credit         can launch the offer only after it secures govern-     ment K N Vaidyanathan has said. In        transacting parties should ensure a proper    which form over 60% of the local insur-         your books as of December 31,
           cards, mortgages, auto and con-           ment approvals. The Cabinet Committee on               Budget 2011-12, Finance Minister          migration of policyholders so that their      ance industry's total assets under man-         2010," the regulator has said in a let-
           sumer loans, student loans, corpo-        Economic Affairs, or CCEA, has to approve the trans-   had announced to allow foreign            existing policies continue to be serviced     agement of 14.7 lakh crore, will be             ter written to all life insurers.
           rate debt and offshore remittances.       action.                                                investors to invest directly in MFs.      on similar terms and conditions .             allowed to trade in f&O.

           8     MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                              1-15 April, 2011   MONEY MANTRA   9
EP-3-19akm.qxd     3/29/2011        1:59 PM          Page 8

           News Track                                                                                                                               LIC for revision of ...                            Trade into Nasdaq now
                        WISDOM MANTRA
                                                              ‘Can’t deny claim on..’                                                                    LIC is in discussion with the gov-
                                                                                                                                                    ernment on changing the investment
                                                                                                                                                                                                       Motilal Oswal MF has launched
                                                                                                                                                                                                       MOSt Shares Nasdaq 100, country's
                                                                          our insurance company           Hospital complaining of pain. On          norms and the cap for a single company             first US equity based exchange-trad-
                Some mutual fund companies are
                providing the facility of customized
                portfolio. You decide, which compa-
                ny should be there in your portfolio
                and in which percentage, the com-
                pany will follow your diktat. Go for it.
                                                              Y           can't deny you claims on
                                                                          frivolous grounds. If it says
                                                                          that you hid the existing
                                                              disease while taking the policy, it
                                                              would have to prove the same with
                                                                                                          September 6, a bypass surgery was
                                                                                                          conducted on him by Dr Karmarkar.
                                                                                                          He was discharged on September 15.
                                                                                                              Parashar put in a claim of Rs 2.57
                                                                                                          lakh from the insurance company and
                                                                                                                                                    is likely to be one to two per cent of the
                                                                                                                                                    total investment corpus. At present, LIC
                                                                                                                                                    is allowed to invest up to 10 per cent of
                                                                                                                                                    capital employed by the investee com-
                                                                                                                                                    pany or 10 per cent of the fund size in a
                                                                                                                                                                                                       ed fund (ETF), which seeks to track
                                                                                                                                                                                                       the Nasdaq-100 index. The new fund
                                                                                                                                                                                                       will be open for subscription from till
                                                                                                                                                                                                       March 23. The minimum investment
                                                                                                                                                                                                       amount during the NFO is Rs 10,000.
                                                              evidence. Arecent ruling by consumer        submitted bills from all the three hos-   corporate entity, whichever is lower. The          Indian investors will be able to buy
                                                              court has reaffirmed this.                  pitals on September 24. On November       capital employed includes share capital,           and sell ETF units during exchange
                                                                   Krishna Gopal Parashar, a senior       15, he received a letter from the com-    free reserves and debentures or bonds.             trading hours in India. MOSt Shares
                                                              citizen and resident of Kalyani Nagar       pany, stating that his claim had been     According to LIC's annual report for               Nasdaq 100 will be listed on the NSE
                                                              has been facing harassment from med-        denied. According to the letter,          2009-10, its total investment corpus was           and BSE and investors will be able                                It will take
                                                              ical insurance companies for over           Parashar was already suffering from       Rs 10 lakh crore, which implies the max-           to buy or sell MOSt Shares NAS-
                                                              three years. However, there is good         hypertension and diabetes - which he      imum exposure to a particular company              DAQ 100 from both the bourses                        some time to rebuild
                                                              news for this long-suffering citizen        had not mentioned when starting his       could be in the region of Rs 10,000-               through their trading accounts at                    but it will not change
                                                              as the Pune District Consumer               policy.                                   20,000 crore.                                      prices quoted on NSE or BSE.
                                                              Disputes Redressal Forum has                    Parashar then turned to the con-
                                                                                                                                                                                                                                                             the economic future
                 I have decided to                            ordered New India Assurance                 sumer forum. However, the insurance                                                                                                               of Japan… If I owned
                                                              Company Ltd and Medi Assist to pay          company filed a written statement,        LIFE TIME ACHIEVEMENT
            exempt the new levy                                                                                                                                                                                                                                Japanese stocks, I
                                                              Parashar Rs 1.25 lakh with an annu-         on the basis of certain information
            in its entirety, both in                          al interest of 9 per cent for four years.   mentioned on Parashar's discharge                                                                                                                    would certainly not
            respect of services                                    Parashar had taken a Mediclaim         card, stating that he had been suffer-                                                                                                                          be selling
                                                              policy of Rs 1.25 lakh for himself and      ing from hypertension and diabetes
            provided by hospitals                             his wife in 2007 from New India             for the past three years. However,                                                                                                                    them..Frequently,
            as well as by way of                              Assurance Company. His wife died            according to the court order, "Other                                                                                                              something out of the
                                                              soon after this. Parashar himself was       than this statement, the insurance
            diagnostic tests until                            admitted in August, 2007 to Shree           company could not produce any proof
                                                                                                                                                                                                                                                                  blue like this, an
            goods and service tax                             Hospital, complaining of pain in the        of medical literature proving that                                                                                                                  extraordinary event,
            (GST) comes into                                  arms. Cardiologists there advised him       Parashar was suffering from hyperten-                                                                                                              really creates a buy-
                                                              to stay in the Intensive Care Unit          sion. The complainant, however, pro-
            force.                                            (ICU) for 24 hours. Later, an angiog-       duced the certificate and affidavit                                                                                                                      ing opportunity
                                                              raphy was done. The diagnosis               from Dr Karmarkar. The court added
                                                              showed that three of his arteries had       that, the on the basis of the certifi-                                                                                                                      WARREN BUFFETT
            Pranab Mukherjee                                  blocks. He was advised to undergo a         cate, it was wrong to deny the claim                                                                                                                          Billionaire investor
            UNION FINANCE MINISTER                            Coronary Artery Bypass Graft surgery        and that it is the insurance company's                                                                                                                   said regarding viability of
            said in parliament while withdraw-                                                                                                                                                                                                               Japanese stocks post earthquake
            ing levy of service tax on health-                (CABG). However, on September 2,            responsibility to substantiate the same   Sam Pitroda, Advisor to Prime Minister on Public Information, Infrastructure and Innovations,
                                                              2007 Parashar was admitted to KEM           with satisfactory evidence.                                                                                                                                  and tsunami in Japan.
            care services.                                                                                                                          presenting the AIMA Life Time Achievement Award to Tata Group Chairman Ratan Tata dur-
                                                                                                                                                    ing a ceremony in New Delhi.

           NEWS BRIEF
           Cabinet approves PFRDA bill                        RBI to get more powers                      Siemens to launch fin arm                 Multi currency remit from IDBI                  Cap infusion into AB                            Union Bank Money Power
           The PFRDA Bill has been approved                   The govt is considering giving more         German multinational Siemens              IDBI Bank has launched a multi-cur-             The Centre has decided to pump                  Nokia has tied with Union Bank of
           and is likely to be introduced in the              teeth to RBI to deal with banking sec-      has said that it has set-up a finan -     rency remittance facility to make               in an additional Rs.378 crores into             India to roll out mobile payment serv-
           current session. If the Bills are not              tor problems before permitting pri-         cial services arm Siemens                 payments in miscellaneous curren-               Allahabad Bank (AB) raising its                 ices called "Union Bank Money pow-
           introduced in the current session,                 vate sector entities to float commer-       Financial Services Private (SFSPL)        cies, taking its remittance offering            holding in the bank to 58 per cent              ered by Nokia" that are targeted at
           they may be tabled in a special ses-               cial banks. It is considering to amend      in India. The newly-set-up compa-         to over 125 bills. The facility offers          from 55 now. This would be over                 the large number of Indians who do
           sion to be convened in end of May                  the Banking Regulation Act through          ny has filed an application for a         transparency to the customers in                and above the Rs.292 crore that                 not have banking facilities. The serv-
           or in the Monsoon Session (July-                   which RBI would be empowered to             Certificate of Registration to com -      terms of exchange rates and insu-               the government had committed                    ice will enable consumers to transfer
           August). The Bill seeks to allow for-              seek information from an entity run-        mence business of a non-banking           lates against subsequent volatility.            earlier. This would take the total              money to other persons, withdraw
           eign direct investment in pension                  ning bank and other businesses like         financial company with the                The facility will be available to all           government capital infusion to                  cash at automated teller machines
           funds, in line with the insurance sec-             insurance and asset management as           Reserve Bank of India (RBI).              customers of IDBI Bank for both                 Rs.670 crore. The fund infusion                 (ATMs) and designated retail stores,
           tor, in which FDI up to 26 per cent is             well. Banking Regulation Amendment          Siemens is an electronic goods            trade and non-trade payments at its             would be through the preferential               and pay utility bills as well as
           allowed. The PFRDA Bill was first                  Bill is likely to be tabled in the          major operating in several coun-          all branches.                                   allotment route.                                recharge pre-paid mobile sims
           introduced in Parliament in 2005                   Monsoon session of parliament.              tries of the world.

           10     MONEY MANTRA    1-15 April, 2011                                                                                                                                                                                                           1-15 April, 2011   MONEY MANTRA   11
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           News Track
           Income tax deptt.                                                                                                                        MARKET PERFORMANCE
                                                                                                                                                     Best Performers in group ‘A’ vs Nifty
           gets more humane
                 ncome tax department has said that the tax returns filed
                                                                                                                                                                    (from 09-03-2011 to 23-03-2011)

                                                                                                    WHO WILL BENEFIT?
                 by 'senior citizens', who are above 60 years, and 'small
                                                                                    Individul taxpayers whose age is 60 years and above
                 taxpayers' having a gross total income of less than
                                                                                    Individual tax payers and HUF whose gross total income
                 Rs 10 lakh, will not attract the routine scrutiny by
                                                                                    before deductions doesn't exceed Rs. 10 lakh per annum.
           the department. 'Senior citizens' for this purpose would                                                                                                                                                                                     Primary con-
                                                                                    Applicable for financial year 2011-12 only.
           be individual taxpayers who are 60 years of age or more.                                                                                                                                                                            cern of any central
           'Small taxpayers' would be individual and Hindu Undivided            of a transaction reported in the annual information return.
           Family (HUF) taxpayers whose gross total income, before              They can provide written reply in this case. At present,                                                                                                    bank including RBI is
           availing deductions does not exceed Rs 10 lakh. This means           the department carries out scrutiny of up to 2% of the total                                                                                                maintaining price sta-
           that the senior citizens and small taxpayers filing IT returns       number of tax returns. The computer aided scrutiny selec-                                                                                                      bility... We are con-
           in ITR-1 & ITR-2 forms during fiscal 2011-12 would be                tion (CASS) system selects the cases at random based on
           exempted from scrutiny. However, the measure is valid only           parameters based on intelligence and annual                                                                                                                 cerned about the rise
           for the current fiscal, as of now.                                   information return. It's noteworthy that finance minister has                                                                                                  in prices... Inflation
               Why such generosity? The statement issued by the                 already announced in the budget that salaried taxpayers                                                                                                      must be low and sta-
           department says, "In order to redress the grievance (of small        (with gross annual salary up to Rs. 5 lakh) will not be
           taxpayers and senior citizens), it has been decided that
           during the financial year 2011-12, cases of senior citizens
                                                                                required to file a return of income if their employer has
                                                                                deducted appropriate tax and they do not have any other
                                                                                                                                                More products for the elderly                                                               ble.. We will do every-
                                                                                                                                                                                                                                            thing possible to con-
           and small taxpayers, filing income-tax returns in ITR-1 and          income.                                                         Those investing in unit-linked pension plans will now have more options.                     tain inflation without
           ITR-2 will be subjected to scrutiny only where the Income                                                                            The insurance regulator is planning to come out with four-five types of pen-
           Tax department is in possession of credible information,"                High Value Transactions reported in AIR                     sion plans with different guarantees. The plan that is available at present                    hurting growth.. As
               Scrutiny of income tax returns is an important mecha-                 Cash deposits aggregating to 10 lakh or more in sav-       guarantees a return of 4.5 per cent on maturity. Only a handful of companies                   inflation eases, we
           nism for ensuring taxpayer compliance and to counter tax-                 ings account.                                              offer this, as the guarantee makes it difficult for them to invest in equity. For           hope lending rates to
           evasion. However, it has evoked some concern from small                   Credit card bill of Rs. 2 lakh or more.                    investors, too, the 4.5 per cent return is not attractive.The Insurance Regulatory
           taxpayers and senior citizens about prolonged enquiries,                                                                             and Development Authority (IRDA) is working on more products with assured                               come down.
                                                                                     Investment of Rs. 2 lakh or more in mutual fund units.
           the statement said explaining the rationale behind the move.                                                                         benefits - but not necessarily the rate of return. At present, the assured return
                                                                                     Investment of Rs. 5 lakh or more in company/institution                                                                                                                     D SUBBARAO
           Selection of cases for scrutiny is also being streamlined                 bond.                                                      is linked to the reverse repo rate (at which the Reserve Bank of India bor-
           to ensure that same cases do not figure year after year.                                                                             rows from banks). The insurers have to give at least 50 basis points over this                                  Governor
                                                                                     Investment of Rs. 1 lakh or more in rights issue of a                                                                                                           Reserve Bank of India
           The income tax department has undertaken intensive                        company.                                                   rate. IRDA is also considering fixing the minimum annuity amount at Rs
                                                                                                                                                                                                                                                    said at a function in Kochi
           upgrade of its software and systems responsible for pick-                                                                            1,000 per month. It has rejected the industry demand for a non-guaranteed unit-
                                                                                     Purchase or sale of immovable property valued at 30 lakh                                                                                                   expressing concern over rising
           ing up cases for intensive scrutiny.                                      rupees or more.                                            linked pension product.Last year, pension products accounted for 20-25 per                           inflation and interest rate.
               The CBDT has already exempted taxpayers from per-                                                                                cent of the total new business premium collected by the industry. Around Rs
                                                                                     Investment of Rs. 5 lakh or more in RBI bond (afore-
           sonal attendence if they are selected for scrutiny on the basis           said transactions are on annual basis)                     65,000 crore came from pension products.

           NEWS BRIEF
            SKS for debt restructuring                       Karnataka bank for villages              SBI would recruit 20000                   Idea launches ‘My Cash’                   ‘Bank on Bike’ scheme                      Goldman buys Benchmark
           SKS Microfinance will raise additional            Karnataka Bank Ltd has signed an         State Bank of India (SBI) would           Idea Cellular in partnership with Axis    State Bank of Bikaner and Jaipur           Goldman Sachs AMC has bought
           funds from banks to tide over liquidi-            agreement with Bartronics India Ltd      recruit more than 20,000 employ-          Bank, has launched Idea MyCash, its       (SBBJ) is planning to launch 'Bank         Benchmark MF, India's ETF premier.
           ty shortage. The Board of SKS has                 for providing banking services in        ees in the next four years. "In the       financial inclusion platform. Under       on Bike' initiative to bring unbanked      The deal value is expected to be
           decided against going for Corporate               remote villages, where population is     coming financial year, nearly 5,000       the arrangement, Idea retail outlets      rural population of Rajasthan under        about Rs 120-130 crore. This values
           Debt Restructuring (CDR) route.                   above 2,000, using business corre-       recruitments will be made in our          will act as Customer Service Points.      the banking net. This initiative is        Benchmark at about four per cent of
           Several banks are believed to have                spondents. The bank is already pro-      group and studies of employment           Through MyCash, Idea will provide         a part of the financial inclusion          its assets under management of
           approached the CDR cell of RBI to                 viding financial inclusion services      patterns reveal more jobs to come         basic banking services like cash          plan of the central government to          about Rs 2,935 crore as of December
           restructure loans advanced by them                through another service provider,        in other banks as well. There seems       deposit, cash withdrawal and bal-         cover all villages with 2,000 and          31, 2010. Goldman Sachs intends to
           to Micro Finance Institutions (MFIs).             Integra Microsystems (P) Ltd. With       to be a bright future for candidates      ance enquiry and will also enable         above population. The bank will            bring actively managed on-shore
           Some major banks such as SBI, ICICI               this, the bank will provide banking      in the coming years", said OP Bhatt,      money transfer between the migrant        cover 838 villages in the state by         funds to India apart from the ETFs of
           and Axis Bank are estimated to have               services to over 230,000 beneficiar-     Chairman, SBI at a function in            population in urban areas to their        March 2012. SBBJ is a subsidiary of        Benchmark. MAPE Advisory was the
           lent over Rs 15,000 crore to MFIs.                ies in different states.                 Ludhiana.                                 beneficiaries back home.                  State Bank of India (SBI)                  advisor to Benchmark in the deal.

           12    MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                              1-15 April, 2011   MONEY MANTRA   13
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           NEWS ANALYSIS
                                                             THE GREAT
                                                                                                                                                                                                  SEBI TAKES COMPLIANCE
           ROLL BACK
                                                                                                                                                                                                  OFFICERS TO TASK
                 ok Sabha has passed the Finance Bill 2011. While mov-                                                                                                                                                                                         of conduct also provides that in case an
                 ing the Bill, finance minister Pranab Mukherjee                                                                                                                                   The move                                                    employee of the intermediary is rendering
                 addressed a few concerns to the earlier proposals he                                                                                                                              SEBI's move is intended to prevent dissemination of         such advice, he shall also disclose the
           made during his budget speech. Before turning into an Act,                                                                                                                              unauthenticated news which could distort the nor-           interest of his dependent family mem-
           certain amendments have been made in the finance bill.                                                                                                                                  mal functioning and prices of stocks. Market regula-        bers and the employer including their
           Here are the details.                                                                                                                                                                   tor SEBI has said that compliance officers of firms         long or short position in the said secu-
                                                                                                                                                                                                   would be liable for breach of duty in case of a failure     rity, while rendering such advice.
           Proposed earlier: AC hospitals with 25 beds and more                                                                                                                                    to check contents forwarded by employees.
           would be brought under 5% service tax net. Service tax was                                                                                                                              Employees should be directed that any market-relat-
           proposed to be levied on pathological test as well.                                                                                                                                     ed news received by them either in their official           Verify from the
           Amendment: The proposed levies on health servic-                            An increase in the level of abatement on these products has come with a
                                                                                                                                                                                                   mail/personal mail/blog or in any other manner should       SEBI website
           es, both in respect of services provided by hospitals as                                                                                                                                be forwarded only after the same has been seen and          In case the advice is rendered by a body
                                                                                       view so that the overall burden of tax comes down and small manufactur-
           well as by way of diagnostic tests, have been withdrawn.                                                                                                                                approved by the concerned intermediary's compliance         corporate, investors should verify
                                                                                       ers benefit.
                                                                                                                                                                                                   officer. The compliance officer shall also be held liable   whether it is registered as portfolio man-
           Impact: Treatment in hospitals and diagnostic tests                         2) Seeing a high incidence of return of unsold stock, the garment and
                                                                                                                                                                                                   for breach of duty in this regard, SEBI has said. Failure   ager under the SEBI (Portfolio Manager)
           will not get affected.                                                      made-up industry has been exempted from excise duty, of returned goods
                                                                                                                                                                                                   by any employee to seek approval from the compli-           Regulations, with SEBI or not. The list of enti-
                                                                                       not exceeding 10 per cent of the value of clearances of the unit in the pre-
                                                                                                                                                                                                   ance officers before forwarding such material had           ties which are registered as portfolio man-
           Proposed earlier: In direct tax proposals, it was proposed                  ceding financial year.
                                                                                                                                                                                                   already been made liable for action.                        agers with SEBI can be verified from the SEBI
           to provide lower tax rate of 15 per cent on dividends                       Impact
           received by Indian companies from foreign subsidiary                        1) This would enable a SSI unit to continue to enjoy the exemption even if it                                                                                           website.
           companies in which the Indian company holds more than                       had a turnover based on Retail Sale Price (RSP) of Rs.8.9 crore in 2010-11.                                 The issue
           50 per cent share capital.                                                  2) Physical verification of stock of such returned goods by Central Excise                                  SEBI has said that it has been receiving complaints
                                                                                       officers would not be necessary. Also, it will prevent the burden of double                                                                                             Carry out due diligence
           Amendment: The holding requirement in the foreign                                                                                                                                       against persons who have been giving stock-specif-
           company has been lowered from 50 per cent to 26 per                         payment.                                                                                                                                                                In case such advice is coming from an individual, by
                                                                                                                                                                                                   ic advice to investors and receiving consideration for
           cent.                                                                                                                                                                                                                                               means of advertisements through SMSs, or the elec-
                                                                                                                                                                                                   the same. Further, it has also come to the notice of
                                                                                       Proposed earlier: The levy of 1 per cent Central Excise duty on 130 items.                                                                                              tronic or print media, whether pursuant to or in the
           Impact: This will enable overseas joint ventures with                                                                                                                                   SEBI that some persons are giving investment advice
                                                                                       Amendment:                                                                                                                                                              absence of any contract or arrangement, it might be
           Indian partnership, to also avail this benefit.                                                                                                                                         through the print media or by sending bulk SMS mes-
                                                                                       1) RSP based assessment with an abatement of 35 per cent has been extend-                                                                                               an attempt to influence market price and lure investors,
                                                                                                                                                                                                   sages even without entering into any contract or
           Proposed earlier: To prepare the ground for transition to                   ed to many of these items.                                                                                                                                              SEBI has said. The regulator cautioned investors to
                                                                                                                                                                                                   arrangement or without any consideration.
           GST, a mandatory levy of 10 per cent was proposed on                        2) Any waste, scrap or parings arising in the course of manufacture of these                                                                                            take adequate care and do due diligence before act-
           branded ready-made garments and made-ups of textiles.                       items gets exempted from the duty.                                                                                                                                      ing on the basis of such advice.
           Clarification made under this                                               3) The following procedural relaxations has been made:                                                      Code of conduct
           i) The levy does not apply to unbranded goods;                                 Physical verification of premises would not be necessary for new regis-                                  The code of conduct for all intermediaries including
           ii) It does not apply to goods made to order for a retail cus-              trants. The visits to such units by Central Excise officers would be permitted                              portfolio managers provides that the intermediary or
                                                                                       only with due authorization as in the case of SSI units.

                                                                                                                                                                        Content: Harish Kumar
               tomer;                                                                                                                                                                              any of his employees shall not render, directly or indi-
           iii) The benefit of SSI exemption is available to goods                        They would be required to file only quarterly returns; and                                               rectly any investment advice about any security in
                bearing or sold under the brand name of the small man-                    A simplified return format will be prescribed.                                                           the publicly accessible media, unless a disclosure of
                ufacturer himself.                                                     Impact:                                                                                                     his long or short position in the said security has
           Amendment                                                                   1) Many related manufactures will be benefited.                                                             been made, while rendering such advice. The code
           1) On some branded ready-made garments and made-                            2) It may be possible that, to get exemption, many manufacturers show their
           ups of textiles, the exempted portion of Retail Sale Price                  good product as waste.
           (RSP) has been increased from current 40% to 55%.                           3) It will provide a simplified regime for taxpayers exclusively manufacturing
                                                                                       these items.                                                                                             Content: Alok Dwivedi

                                    Under section 40 A(9) will be amend-     an article in cases of circumvention.      gets exempted from customs duty.
                                  ed to provide deduction for employer's     Customs and Central Excise duties
                                  contribution to a pension scheme on                                                      An unconditional 1 per cent excise
                                  account of an employee.                      The basic customs duty on CKD kits       duty (and CVD) on mobile handsets
                                                                             containing a pre-assembled engine,         (in addition to 1 per cent NCCD already
                                     No deduction for export profits is      gear box or transmission assembly,         taxable) has been prescribed.
                                  allowed after April 1, 2005. Such export   imported for the manufacture of vehi-
                                  profits will also not be allowed as a      cles has been reduce from 60 (pro-            The concessional rate of 5 per cent
                                  deduction while computing book profit      posed earlier) to 30 per cent.             CVD is extended to all computer printers
                                  for the purpose of levy of Minimum                                                    imported by actual users. Also, Special
                                  Alternate Tax (MAT) after the said date.     Full exemption from excise duty (and     Additional Duty (SAD) has been removed
                                                                             countervailing duty i.e. CVD) on silicon   from such printers.
                                    It has been proposed to insert a new     wafers imported for manufacture of
                                  provision in the Customs Tariff Act to     solar cells/modules has been restored.          Seven specified parts of
                                  enable the Central Government to                                                      personal computers has exempted
                                  extend anti-dumping duty imposed on          Certain types of coking coal import-     from levy of special additional duty of
                                                                             ed for the manufacture of iron or steel    customs.
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           J                                                                                                                                                                                                                                                                         IMPACT ON JAPAN INC
                apan lost almost 1% of its GDP and nearly ten thousand people in nature's
                fury which appeared in the guise of earthquakes, tsunami and subsequent
                nuclear disaster. Equity markets became jittery, currency markets lost balance
           and commodity markets crumbled. Helping hand from across the globe reached                                                                                                                                                                     Manufacturing
           to save Japan, the third largest economy of the world. A fortnight later, Japanese                                                                                                                                                                                                                                     Tokyo Gas Co said it has stopped supplying
           government and the people stood up with confidence and vowed to rebuild their                                                                                                                                                                  Sony Corp said it had suspended operations                              gas to more than 35,000 households and facil-
           nation. Their determination cheered the world, markets started balancing them-                                                                                                                                                                 at six production facilities in the affected area.                      ities in the Kanto area in eastern Japan.
           selves. Here is a report.                                                                                                                                                                                                                      One factory was flooded, while the other five
                                                                                                                                                                                                                                                          did not suffer major damage. Nissan Motor said                          Refiners
                                                                                                                                                                                                                                                          it had halted production at all four of its car                         Cosmo Oil said a fire had broken out from
                                                                                             The economic toll on Japan is set to be                                                                                                                                                                                              near an LPG tank at its Chiba refinery and
                                                                                             the heaviest ever at an estimated $184                                                                                                                       assembly factories in Japan, including those
                                                                                                                                                                                                                                                          in severely hit Tochigi and Fukushima prefec-                           was not yet extinguished. JX Holdings said a
                                                                                             billion (Rs.8.3 lakh crore) and counting.                                                                                                                                                                                            fire at its Sendai refinery had originated from
                                                                                             Insurance claims for life and possibly for                                                                                                                   tures. Small fires broke out at two of the fac-
                                                                                                                                                                                                                                                          tories. Toyota Motor said it had halted produc-                         a land oil product shipping facility nearby, not
                                                                                             non-life could also be the highest in                                                                                                                                                                                                an LPG tank as feared earlier.
                                                                                             history.                                                                                                                                                     tion at two factories with combined annual
                                                                                                                                                                                                                                                          capacity of 420,000 small cars built mainly for                         Maruzen said it had shut two naphtha crack-
                                                                                             Sectors likely to be hit include electronics,                                                                                                                overseas markets.                                                       ers at its Chiba plant with capacities of 480,000
                                                                                             automobiles & steel but impact may be                                                                                                                        Fuji Heavy Industries Ltd said it had halted eight                      and 690,000 tonnes of ethylene per year,
                                                                                             temporary. Economy is likely to slow                                                                                                                         of its 10 factories, including all five car and car                     respectively. Kyokuto Petroleum said it had
                                                                                             down in first half of 2011, but reconstruc-                                                                                                                  parts-related plants for its Subaru-brand vehi-                         shut its 175,000 barrels per day (bpd) Chiba
                                                                                             tion-driven recovery seen in second half.                                                                                                                    cles in Gunma prefecture, north of Tokyo. It also                       refinery. JX Holdings said it was working to shut
                                                                                                                                                                                                                                                          suspended operations at its aircraft and power                          its 404,000 tonnes per year Kawasaki naph-
                                                                                             ADB warns of brief recession in Japanese                                                                                                                     products factories in Tochigi. Kirin Holdings said                      tha cracker near Tokyo.
                                                                                             economy. France calls meeting of G7 to                                                                                                                       four large beer tanks had collapsed and some                            Metals
                                                                                             respond to the crisis, mentioning possi-                                                                                                                     of the contents had been washed away at a fac-                          Sumitomo Metal Industries said it had suspend-
                                                                                             ble purchases of Japanese debt.                                                                                                                              tory in Sendai. Operations were also suspend-                           ed operations at its Kashima steel mill's two
                                                                                             Yen against dollar highest since 1995                                                                                                                        ed at its factory in Ibaraki after part of the facil-                   blast furnaces after a fire broke out at the plant.
                                                                                             breaching 80, as Japanese firms repa-                                                                                                                        ity was damaged.                                                        JFE Steel said it had temporarily suspended
                                                                                             triated funds to avert a crisis. Bank of                                                                                                                     Energy                                                                  operations at two blast furnaces at its Higashi
                                                                                             Japan injected another $62bn on March                                                                                                                        Electric Power Development has halted oper-                             Nihon plant near Tokyo for checks. Nippon Steel
                                                                                             16 to calm markets. It had pumped in                                                                                                                         ations at its Isogo thermal plant in Yokohama.                          Corp said it was checking on its facilities.
                                                                                             $347 billion during the week ended
                                                                                             March 20.                                                                                                                                                                          Effect on India is likely to be limited. Yen         Yen may pinch Indian companies
                                                                                                                                                                                                                                                                                loan cost may go up. Japanese aid may                Yen has breached the 80-mark against the

                                                                                                                                                                                                                                                  EFFECT OF DISASTER ON INDIA
                                                                HSBC: There are no such reports that                                                                                                                                                                            see temporary slowdown. Japanese-fund-               US dollar for the first time in 16 years.

                                                                                                                                                                                                                                                                                                                                                                                        Content: Alok Dwivedi, Infographic: Harikrishan
           Japanese manufacturing sites have been damaged directly. It means that the risk of sup-                                                                                                                                                                              ed infrastructure projects likely to be affect-
           ply chain disruption is likely to be relatively minor and temporary.                                                                                                                                                                                                                                                      Indian companies, which had used the
                                                                                                                                                                                                                                                                                ed temporarily. Insurance premium for
                                                                                                                                                                                                                                                                                                                                     Japanese currency to raise overseas debt,
           D&B: Even if Japan succeeds to resolve nuclear safety concerns, reconstruction is likely
           to be delayed until third quarter due to the severe disturbance to infrastructure and sup-
           ply chains.
                                                                                                                                                         JAPAN TREMORS SHAKE THE                                                                                                companies such as ONGC is likely to rise.
                                                                                                                                                                                                                                                                                Japan accounts for about 4% of the for-
                                                                                                                                                                                                                                                                                eign direct investment in India over the
                                                                                                                                                                                                                                                                                past decade, according to the department
                                                                                                                                                                                                                                                                                                                                     may have some reason to worry as their
                                                                                                                                                                                                                                                                                                                                     repayment cost could go up.
                                                                                                                                                                                                                                                                                                                                     RBS: Toyota has said that the production

           Nomura: The largest negative impact on quarterly GDP growth will emerge in April to                                                                                                                                                                                  of industrial policy and promotion. As far           of the Etios sedan developed for the Indian
           June. A slump in domestic demand is not likely but neither a V-shaped recovery due to                                                                                                                                                                                as portfolio investments go, the share is            market will not be affected as engines and
           the extensive area damaged.                                                                                                                                                                                                                                          even smaller.                                        transmissions are shipped over a medi-
           Moody's Analytics: Damage to Japan's nuclear power plant and infrastructure will dis-                                                                                                                                                                                Japanese carmaker Toyota postponed the               um to long term basis.
           rupt energy, water, and other production inputs. Hence, economy of Japan is likely to                                                                                                                                                                                official inauguration of its second Indian           Citi Investment Research & Analysis:
           contract in the April- June quarter.                                                                                                                                                                                                                                 manufacturing facility at Bangalore in view          In near term, there may be risks of delays
                                                                                                                                                                                                                                                                                of the devastating earthquake and tsuna-
           Citi Asia Macro Flash: If we look back, the Kobe earthquake, Japan imports from Asia                                                                                                                                                                                                                                      and thermal/coal costs going up. But India
                                                                                                                                                                                                                                                                                mi in Japan. The company has invested
           only slowed for about 6 months only. Impact on Asia's growth should not be                                                                                                                                                                                                                                                will continue to see Japanese investments,
                                                                                                                                                                                                                                                                                Rs 3,200 crore to set up a car facility that
           exaggerated.                                                                                                                                                                                                                                                         rolls out its sedan Etios.                           technology and capital in longer term.
                            EFFECT OF DISASTER ON GLOBAL ECONOMY

                                                                   HSBC: Japan's disaster is not likely to knock emerg-          Production stopped in other parts of world                    Effect of disaster on energy prices           Effect of disaster on financial markets                                     Exodus due to disaster
                                                                   ing Asia off its current growth trajectory or provide the     Toshiba Corp has briefly shut a flash memory facility         Nomura: Four refineries have halted           Nomura: As negative real interest rates                                     The US embassy said it would help fly American cit-
                                                                   necessary deflationary impulse to ease rapidly grow-          in Japan. Several parts of the new iPad2 tablet come          production. As long as these refiner-         are prevailing in the majority of the major                                 izens in Japan to safer places. Britain, France,
                                                                   ing price pressures.                                          from Japan, including the battery and the flash memo-         ies are down, imports would need to           economies, investors are still incentivized                                 Italy, the Netherlands and Australia are among the
                                                                                                                                 ry used to store music and video on the device.               rise, thus tighten regional refining          on investment in financial markets.                                         other countries whose governments have told their
                                                                   Nomura:Tangible implications for other regions are like-
                                                                                                                                                                                               margins.                                      Moody's Analytics: Spikes in investor risk                                  nationals to consider leaving Tokyo. France has
                                                                   ly to be much milder. The insurance sector is expect-         Goldman Sachs warned of bottlenecks in the supply
                                                                                                                                                                                                                                             aversion may trigger outflows from fast-                                    asked Air France to mobilize extra planes for evac-
                                                                   ed to react most and insurance companies will bear            of silicon wafers, film used in LCD circuits and resin used   Citi Asia Macro Flash: Higher
                                                                                                                                                                                                                                             growing emerging markets. But any capi-                                     uations. China has already evacuated its nation-
                                                                   the brunt of adjusting their provisioning.                    to connect chips to boards, products made by Japanese         demand likely for fossil fuels. Shortage
                                                                                                                                                                                                                                             tal flight should be short lived due to attrac-                             als from north coast to Niigata.
                                                                   Moody's Analytics: The unfolding disaster is not like-        companies such units of Sony, Hitachi and Mitsubishi.         of nuclear energy in Japan coupled with
                                                                                                                                                                                               Middle East and North Africa supply           tive fundamentals of emerging regions.                                      Areva is moving workers away from areas affect-
                                                                   ly to derail the growth. Global growth is expected to be      GM will temporarily stop production at pick-up trucks
                                                                                                                                                                                               concerns may add to volatility in oil         Citi Asia Macro Flash: Japanese compa-                                      ed by the disaster or possible path of radioactive
                                                                   boosted by post-earthquake reconstruction in the sec-         plant in Louisiana due to shortage of parts. GMs South
                                                                                                                                                                                               prices.                                       nies may delay overseas direct investment                                   fallout. Chartis, Japanese division of AIG, has
                                                                   ond half of 2011.                                             Korean unit may stop overtime production. Renault
                                                                                                                                                                                                                                             plans in near term, but Japanese compa-                                     moved some of its managers from Tokyo to com-
                                                                   Moody's Asia Pacific Weekly: Preliminary estimates            Samsung, the South Korean unit of Renault SA,will             Moody's Analytics: The shutdown of                                                                                        mand center in Osaka. Japanese companies, too,
                                                                                                                                 cut back on weekend and overtime production because           nuclear reactors is likely be offset by       nies may diversify production bases in more
                                                                   of insured losses are $15-$35 billion and it could rise                                                                                                                                                                                               have started to move some of their staff or give
                                                                                                                                 of parts shortage. Jamco, which makes galleys for             increased imports of coal, liquefied nat-     geologically stable countries in long term.
                                                                   more. These losses will fall to insurance and reinsur-                                                                                                                                                                                                them the option of working from home.
                                                                   ance companies in Japan and around the world.                 Boeing 787 Dreamliner in Japan, said delivery could           ural gas, and oil, it would drive up prices
                                                                                                                                 be hampered by gasoline supplies and higher prices.           for these commodities.
           16    MONEY MANTRA                                1-15 April, 2011                                                                                                                                                                                                                                                                 1-15 April, 2011   MONEY MANTRA      17
EP-3-19akm.qxd    3/29/2011         1:59 PM         Page 16


                                                                                        ONE MORE STEP
           TOWARDS GST
                    o roll out the much awaited and debated Goods and Services Tax
                    (GST), the central government is coming up with the Constitutional
                    Amendment Bill (CAB) in Parliament. To present the bill, UPA
                    has got the nod from Union cabinet and from president as well.
           It is due to the lack of consensus in Parliament that GST has missed
           its rollout deadline twice and its draft script has been revised four
           times. Many states, mainly those ruled by NDA, is opposing the amend-
           ment (to CAB), saying it will undermine their fiscal autonomy. Once the
           CAB comes up for debate in Parliament for the proposed amendment,
           the central government will need two-third majority both in the Lok
           Sabha and the Rajya Sabha to pass it.

                                                               What is GST?
           Under the Goods and Services Tax (GST), the Centre and states
           will impose the tax on common goods and services. Once GST is
           implemented, it will replace multiple indirect taxes, such as such
           as VAT, Central Sales Tax, State-level sales tax, entry tax, stamp
           duty, telecom license fees, turnover tax, tax on consumption or
           sale of electricity, taxes on transportation of goods and services etc.
           with a single levy regime.
                Why Constitutional Amendment Bill is needed
           Like many countries, in India a dual GSThas been proposed, where-
           by a Central Goods and Services Tax (CGST) and a State Goods
           and Services Tax (SGST) will be levied on the taxable value of every
           transaction of supply of goods and services. To make it possible
           both the centre and the states will need to have concurrent pow-
           ers to tax a good or a service. According to the current arrangement,
           the centre cannot impose a tax beyond manufacturing and serv-
           ices whereas states cannot levy service tax but can only tax goods
           at retail level. Thus, to allow the centre and states to levy this tax
           simultaneously, a constitutional amendment was needed.
                                                                                     What are the benefits of GST?
                                                                                     The introduction of goods and services tax will eliminate the multi-
                  What is the problem in implementing GST?                           ple layers of taxation. GST will facilitate seamless credit across the
           The lack of consent between the centre and the state is what is           entire supply chain and across all states under a common tax base.
           causing the delay in the introduction of the bill. In the Union Budget    GST will be levied only at the destination point, and not at various
           for the year 2006-2007, Finance Minister proposed that India should       points (from manufacturing to retail outlets). Currently, a manufac-
           move towards national level GST that should be shared between             turer needs to pay tax when a finished product moves out from a
           the centre and the states. He proposed for GST to come into force         factory, and it is again taxed at the retail outlet when sold.For Individual
           from April, 2010. But the deadline to introduce missed not once but       & Companies: In the GST system, both central and state taxes will
           twice (second was in April, 2011) due to differences between states       be collected at the point of sale. Both components (the central and
           and the central government. Now the finance ministry has revised          state GST) will be charged on the manufacturing cost. This will ben-
           the draft bill for the fourth time since the discussions on the new tax   efit individuals as prices are likely to come down. Lower prices will
           regime started. However, even the fourth time it is being opposed.        lead to more consumption, thereby helping companies.
           In order to build a consensus for implementing this crucial reform,       For Centre & State: It is estimated that India will gain USD15 billion
           the finance minister even appealed to corporate and industrial organ-     a year by implementing the GST, as it would promote exports, raise
           isations to help him convince opposing political parties about the        employment and boost growth. It will divide the tax burden equi-
           importance of the reform. The government is now hoping that GST           tably between manufacturing and services.
           would come into effect from April, 2012.
                                                                                     Latest draft of GST proposals
                                                     What is the latest?             Many states, mainly those ruled NDA, objected to various provisions
           To make way for GST, government has proposed to create all-pow-           in the previous three draft bills. Now, the centre has prepared a fourth

                                                                                                                                                                    Content: Harish Kumar
           erful GST council, which will act as a joint forum for the centre         draft, dropping some key proposals made earlier. In latest script petro-
           and states. The council will be headed by the finance minister            leum products, natural gas, alcohol, tobacco and ATF are kept out
           and will have finance ministers of each state as its members.             of the GST regime. On these products, the centre and state will con-
           According to the bill, the council will make recommendations on           tinue levying CENVAT and sales tax respectively. Also a Goods and
           taxes, cesses and surcharges levied by the centre, states and             Services Tax dispute Settlement Authority would be set up to address
           local bodies, which may be subsumed in GST. Notably, the GST              any dispute or complaint filed by state governments or the central gov-
           council will be set up through a Presidential order within two-months     ernment. The three member authority will be headed by a retired
           after the passage of the bill in Parliament and state assemblies.         Supreme Court judge or chief justice of high court.
           18    MONEY MANTRA    1-15 April, 2011
EP-20-37--_Alok.qxd      3/29/2011         2:00 PM   Page 2

         GOLD & SILVER                                                                                                                                                                                               GOLD & SILVER
           Global worries continue,                                                                                                            pressure as investors concerned about
                                                                                                                                               the situation in Japan. While a 9.0-
                                                                                                                                               magnitude earthquake and tsunami
                                                                                                                                                                                                E-Silver NSEL

           gold has further room to rise                                                                                                       have caused tremendous destruction
                                                                                                                                               to Japan and killed around 10000 peo-
                                                                                                                                               ple, the country is facing a nuclear cri-
                                                                                                                                               sis as radiation leak was detected at
                Anjani Sinha                                                                        $1445.7 early in the fortnight, but then   a damaged power plan. The situation

                                                       Gold is likely to rise as                    profit-taking sent the metal lower due     in the Middle East and North Africa
                   GOLD & SILVER                                                                    to uncertainty in the financial markets.   remained tense. While Libya's gov-
                        Market Review                  factors like geopolitical                    Prices fell 4 percent before recover-      ernment announced a ceasefire
            (06th Mar 2011 to 20th Mar 2011)           tensions, inflationary                       ing. The metal dropped the most in six     against the rebels, fighting continued.
               Gold dropped in the fortnight as                                                     weeks, while other commodities and              Movement of gold price signaled
           investors sold the shiny metal to cover     worries and sovereign                        equities plunged as Japan battled to       that the metal is more sensitive to the
           some of their losses in other markets,      crisis concerns remain                       prevent a nuclear meltdown that            situation in Japan and currency out-
           especially equities which fell tremen-                                                   threatens to worsen damage to the          looks than unrest in the MENAregion.
           dously due to earthquake which trem-        intact. Traders are                          economy from last week's earthquake.       Moody's downgraded Spain to Aa2
           bled Japan. The benchmark Comex             looking for a                                Later in the fortnight, the price          from Aa1 with a negative outlook,
           contract ended with modest loss of -                                                     rebounded strongly as Japan's earth-       leaving the euro vulnerable to more
           1.1%. Silver also drifted lower after       consolidation in the                         quake and sovereign concerns in the        downward pressure in the coming
                                                                                                                                                                                           Gold Comex Continuous
           making a new 31-year high in the fort-      prices as the typically                      Eurozone spurred safe haven demand.        weeks. It has some negative impact on
           night. At COMEX Gold April contract                                                          Investors shifted attention from       precious metal. The G-7 joint inter-
           lost by USD 15.25/Toz, while                lean demand period in                        the turmoil in the Middle East and         vention to curb appreciation in
           COMEX Silver May contract lost by           India keeps the demand                       North Africa to the impacts of Japan's     Japanese yen lifted EUR-USD which
           137.00 cents/Toz. In the same period                                                     massive earthquake on global eco-          has given some support to the yellow
           MCX Gold April contract lost by Rs.         quotient under check.                        nomic growth. Financial markets            metal. The Group of seven nation's
           250.00/10 gram and MCX Silver May                                                        remained under severe downward             coordinated intervention was the first
           contract lost by Rs.306.00/Kg. At                                                                                                   seen since 2000, in an attempt to aid
           NSEL, Ahmadabad spot Gold lost Rs.                                              E-Gold NSEL                                         Japan's recovery from recent natural
           264.00/10 gram and Silver gained by                                                                                                 disasters.
           Rs. 64.00 /Kg. NSEL Demat E-Gold                                                                                                    Outlook: Gold price has further room
           lost by Rs. 24.20/ gm, while NSEL                                                                                                   to rise as factors including geopoliti-
           Demat E-Silver gained by Rs. 16.50/                                                                                                 cal tensions, inflationary worries and
           100 gm.                                                                                                                             sovereign crisis concerns remain
                Gold rallied to a record high of                                                                                               intact. Moody's said Japan may 'at
                                                                                                                                               some point' reach a fiscal 'tipping
                                                                                                                                               point' if investors lose confidence in
                                                                                                                                               the country's national finance.
                                                                                                                                               Anxiety about Japan's nuclear disas-        Silver Comex Continuous
                                                                                                                                               ter at the Fukushima Daiichi plant and
                                                                                                                                               ongoing concerns about Bahrain,
                                                                                                                                               Libya and other countries in the
                                                                                                                                               Middle East and North Africa contin-
                                                                                                                                               ued to support gold. Traders are
                                                                                                                                               looking for a consolidation in the
                                                                                                                                               prices from here on as the typical-
                                                                                                                                               ly lean demand period in India
                                                                                                                                               keeps the demand quotient under
                                                                                   SPOT MARKET PRICES                                          check. India recorded the strongest
                                                       Commodity Market                        Price Open Close Prev.    Net                   growth of 66% in gold demand in
                                                                                              Quote             Close Change                   2010 at 963.1 tonnes due to jew-
                                                       Gold            NSEL Amd         Rs. /10 gm. 21098 20783 21047                 -264     ellery demand. The retail investors,
                                                       Silver          NSEL Amd              Rs./kg. 53417 52889 52825                  64     however, would be keen to jack up
                                                                                                                                               their financial portfolios with gold,
                                                                                 FUTURES MARKET PRICES                                         as the metal has been outstanding
                                                       Market Commodity-         Unit      Open    High     Low      Close   Prev.     Chg
                                                                                                                                               as an investment over the last five
                                                              Contract                                                       Close
                                                                                                                                               years or so. The well-entrenched
                                                       MCX      Gold-Apr-11      Rs/10 gm.    21111 21274 20469 20848 21098 -250               inflationary expectations should keep
                                                       COMEX    Gold-Apr-11      $ / Troz   1435.00 1445.70 1380.70 1416.10 1431.35 -15.25
                                                                                                                                               the retail flows in the commodity
                                                       MCX      Silver-May-11    Rs/kg.      53500 54767 51370 53111 53417 -306
                                                                                                                                               unabated even if the physical demand
                                                       COMEX    Silver- May-11   Cents/Troz  3564.00 3674.50 3356.50 3424.00 3561.00 -137
                                                                                                                                               takes a cyclical backseat.
           20    MONEY MANTRA   1-15 April, 2011                                                                                                                                                                1-15 April, 2011   MONEY MANTRA   21
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                EDIBLE OIL                                                                                                                                                                                                                        C OTTON

           Higher supply and sluggish                                                                                                        Lifting of cotton export caps to
           demand, pressure likely on price                                                                                                  push cotton prices further
                                                                                                                                                        Market Review                                                 Cotton futures (ICE)
                      Market Review                                                  Refined Soy oil MCX                                      (06th Mar 2011 to 20th Mar 2011)
            (06th Mar 2011 to 20th Mar 2011)                                                                                                     The International cotton prices
                Refined soya oil prices continued                                                                                            tumbled during this fortnight as
           to trade lower in the fortnight. Refined                                                                                          investors' exited positions after news
           soya oil ended lower, tumbling in uni-                                                                                            Japan's nuclear emergency was get-
           son with a broad-based sell off across                                                                                            ting worse. The mills and speculative
           most asset classes. Investors rushed to                                                                                           buying which powered the market to
           exit riskier assets in favor of cash.                                                                                             record highs dried up for the moment.
           MCX near month contract closed at                                                                                                 The ICE Cotton futures for May deliv-
           Rs.619.95/10 kg with net loss of                                                                                                  ery corrected lower by 16.38 cents,
           Rs.29.10/10Kg.                                                                                                                    or 7.60 %, to close at $1.9910 a pound
                Refined soya oil prices have come                                                                                            in New York.
           under pressure in the fortnight on                                                                                                    Behind high prices and market
           expectations of a bumper crop in                                                                                                  volatility is the tight supply and
           South America which is on track to                                                                                                demand situation. The March USDA
           break the record from 2010, thereby                                                                                               report made their first significant revi-
           lifting the forecast for a bigger glob-                                                                                           sions in several months. Among the
           al stockpile of the world's most used                                                                                             revisions were a 1 million bale reduc-
           oilseed. Global oilseed production for                                                                                            tion to the harvest forecast for India
           2010/11 is projected at 444.2 million                                                                                             and a 500,000 bale reduction to the
           tons, up 2.4 million tons from last          Market    Contract Open       High        Low      close     Prev.      Net          harvest forecast from China. Partially
           month. Brazil soybean production is                                                                       close      change       offsetting these decreases in cotton        Market          Contract Open        High       Low       close            Prev.   Net
           forecast at a record 70 million tons, up     MCX       Mar’ 11   647.00    648.00      596.20   619.95    649.05     -29.10       production figures were a 600,000                                                                                      close   change
           1.5 million tons from last month due                                                                                              bale increase in the expected harvest       ICE (Cents/b) Mar 11      196.1      199.1      195.3     199.1            215.5   -16.38
           to higher projected yields. The grain        crushing activity boosted local avail-     od. During October-February 2010-         from Brazil and a 500,000 bale
           and oilseed sector has seen a 16 per         ability, good crushing parity due to       11, exports augmented by 93.93 per        increase in the expected harvest from       increases in several major countries         are 261.82 lakh bales as against 247.4
           cent reduction in the speculative long       high price of oil and export demand        cent to 25.87 lakh tons from 13.34        Australia. The current forecast for         more than offset declines in other           lakh bales last year.
           position since the peak in early             and negative margin in import and          lakh tons in the corresponding peri-      2010-11 world production is now 115         exporting countries, resulting in one        Outlook: The Global cotton prices
           February. Talk of fund managers              high prices of edible oil has pres-        od of the previous year.                  million bales, 300,000 bales lower          of the largest cotton trade volumes in       is bullish as damage of the killer quake
           shifting out of agriculture into other       sured the demand growth.                   Outlook: Demand for the Soyabean          than February's estimate. The world         recent years.                                and tsunami to an economy as large
           sectors combined with a slight                   The export of oilmeals during          in the spot market from end-users         cotton consumption estimate was                  In India, Cotton prices remained        as Japan will eventually hit cotton
           improvement in the global supply             February 2011 is reported at 703,400       ahead of summer season is likely to       essentially unchanged. Total World          stable with moderate transaction. The        demand and change the market's
           and demand outlook has helped the            tons compared to 640,960 tons in           weigh on the market. Edible oil           ending stocks at 42.33 million bales        prices of the most common Shankar-           underlying fundamentals. USDAesti-
           move lower. The dollar has recov-            previous month (January 2011), up          imports in the coming months are          was largely unchanged from the pre-         6 variety traded between Rs.59,000           mate indicates slight rise in cotton
           ered from its recent lows thereby            by 10 per cent. The overall export         likely to be higher because of            vious month. Chinese cotton imports         to Rs.59500 per candy. Kapas & seed          world trade as lower production in
           also putting some downward pres-             of oilmeals for April 2010 to              decline in international price.           are expected to offset the decrease in      prices too remained firm. The cotton         China is expected to increase import
           sure on prices of soya oil.                  February 2011 (11 months) is report-       Higher supplies and sluggish              production, and the Chinese import          production in the country during cot-        demand. Price of cotton is therefore
                As per data of the Solvent              ed at 4,491,872 tons compared to           demand is likely to keep the prices       figure increased 500,000 bales from         ton season 2010-11 is concerned, tak-        likely to remain volatile given such
           Extractors' Association of India, the        3,000,380 tons, up by 50 per cent.         under pressure. Indian market is          15 to 15.5 million bales.                   ing into account the damages to cot-         demand-supply dynamics. Arrivals
           import of vegetable oils during              Last year, during November 09 to           likely to move in line with weak              World cotton exports in 2010-11         ton crop due to unseasonal rains in          in various upcountry markets have not
           February 2011 is reported at 549,881         February 2010, export of oilmeals          overseas market.                          are estimated at 38.6 million bales,        the month of December 2010 and               maintained the expected pace. Owing
           tons compared to 700,769 tons in             was dropped heavily due to dispari-        On the other hand, tight projected        up 9% from the previous year and the        extreme cold wave in the month of            to lesser pace of arrivals, non-avail-
           February 2010, down by 21.5 per              ty in domestic crushing. However,          US end of year stocks, strong demand      second consecutive year of trade            January 2011 in Saurashtra region of         ability of quality cotton as also like-
           cent, consisting of 538,172 tons of          this year, during last five months, due    and worries of crop losses from heavy     rebound. Exports in 2010-11 for             Gujarat, all the three areas- Vidharbha,     ly possibility of yarn exports, the
           edible oils and 11,709 tons of non-          to recovery in soybean meal export         rains in Brazil rekindled investor buy-   Australia (3.0 million bales), Brazil       Marathwada and Khandesh- of                  domestic mills have once again
           edible oils. The overall import of           coupled with good crush margin and         ing interest in the market. The rains     (2.7 million), and the United States        Maharashtra and Adilabad region of           become active in covering their cotton
           vegetable oils during November 10            better oil prices boosted the export.      in Brazil raised fears of lost yield      (15.75 million) are estimated to            Andhra Pradesh, the CAB had revised          requirement. Positive decision with
           to February 11 is reported at                    On the other hand, according to        potential as well as making transporta-   increase 42 percent, 36 percent, and        the crop prospects downward for the          regards to lifting of cotton export caps
           2,692,683 tons compared to                   Soyabean Processors Association            tion of grains to export ports diffi-     27 percent, respectively, from the pre-     current cotton season 2010-11 to             would push Indian cotton prices fur-
           3,114,553 tons, down by 13.5 per             (SOPA), India's soya meal exports          cult. Brazil is the world's second        ceding year. India and Uzbekistan are       312.00 lakh bales as against the ear-        ther upward. It is felt that the domes-
           cent. Import of edible oils decreased        increased by more than two-fold to         largest producer of soybeans behind       estimated to export 4.8 million bales       lier estimate of 329.00 lakh bales. The      tic market cotton prices may remain
           due to higher production of oilseeds         5.45 lakh tons during February com-        the US and counted on to relieve the      and 3.5 million bales in 2010-11,           arrivals in all the cotton growing states    firm in the coming weeks.
           during kharif season and expected            pared with 2.18 lakh tons that were        strain on tight US supplies will give     down 27 percent and 8 percent,              have been picking up. As on 18th
                                                                                                                                                                                                                                                     (Writer is MD, National Spot
           better oilseed crop in Rabi, Increased       reported last year in the same peri-       some support to the prices.               respectively, from a year ago. Export       March 2011, the progressive arrivals                             Exchange of India Ltd.)
           22   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                  1-15 April, 2011    MONEY MANTRA    23
EP-20-37--_Alok.qxd     3/29/2011          2:00 PM    Page 6

           D STREET                                                                                                                                                                                                                                   D STREET
                                                                                                                                                             PUT CALL CONCENTRATION (March)
           Signs of resilience, collect                                                                                                                                                                                            options is at 1.07.
                                                                                                                                                                                                                                       Analyzing the put-call concentra-
                                                                                                                                                                                                                                   tion for March series, we see that 5300
                                                                                                                                                                                                                                   and 5400 put options are the most

           quality stocks on dips                                                                                                                                                                                                  active and have the highest amount
                                                                                                                                                                                                                                   of open interest with ~81lakh and
                                                                                                                                                                                                                                   ~79lakh shares outstanding respec-
                Ashish Kapur                            term growth story still remains intact.     automobiles, capital goods, consumer                                                                                           tively. The active participation of
                                                        Growth is sustaining on the back of the     goods, construction and infrastructure                                                                                         5000, 5100 and 5200 puts suggests
                Indian Markets have in the past         enormous demographic dividend               are the sectors to focus on.                                                                                                   that there are many crucial support
           few weeks shown amazing resilience           which we enjoy. Combining this with             The current weakness should be                                                                                             levels between 5000 and 5500.
           in the wake of serious concerns over         the great entrepreneurial spirit of our     viewed as an aberration in the other-                                                                                               On the calls front, there is strong
           developments in the Middle East and          business community makes us believe         wise long term bull market and should                                                                                          build up in 5500 call as compared to
           Japan. Global markets have had a sig-        that we will continue sailing regard-       be used by investors to accumulate                                                                                             5600 call in last 15 days. The strong
           nificant cut while our markets have          less of the obstacles prevailing at pres-   quality stocks.                                                                                                                outstanding open interest position is
           got away with a sideways movement.           ent. Moreover there are some initial                                                                                                                                       in 5500 and 5600 calls with ~89akh
           One reason is that we had anyway cor-        signs of Government getting its act         Nifty Technicals                                                                                                               shares and ~78lakh shares outstand-
           rected more than 15 percent in the first     together. In the latest annual budget            Equity markets are showing signs                                                                                          ing respectively. On the above obser-
           two months of this calendar year. Also       they have for the first time talked         of resilience since the beginning of                                                                                           vations, we believe the likely range for
           unlike other emerging economies, a           about direct transfer of subsidy in cash    March. It has confined itself in sort                                                                                          the next few trading sessions is
           very large part of our economic              and chalked out a time schedule for         of a range despite bombardment of                                                                                              expected to be 5000-5700.
           growth and corporate performance             implementing it. Also during the            bad news from both global and                                                                                                                (Writer is CEO, Investshoppe
           depends upon domestic consumption            course of interviews after the budget       domestic fronts. However, it is not cer-                                                                                                                       India Ltd.)
           and development. Hence, to a large           speech, finance minister has hinted         tain for how long will bears let that      Volatility Index is currently standing
           extent, we are unaffected by devel-          that insurance and some other impor-        happen on the bourses or bulls would       at 24.64. It has been in the range of
                                                                                                                                                                                                          OPTION STRATEGY FOR MARCH
           opments in international economies           tant bills will be tabled in the parlia-    finally take over.                         26.6 to 21.83 since the beginning of       BUY 1 LOT 5600 CALL @ RS.15.75, SELL 2 LOTS 5700 CALL @
           which do not bear a significant long         ment during the course of the pres-              As of now, Nifty has fixed itself     the month.                                 Rs.4.4
           term impact on global economic sta-          ent financial year. There are also          in the range between 5565- 5345 since          The technical indicators aren't             Investors can opt for the above bull-call spread. It is basically for the
           bility and trade.                            chances of a political consensus            past few trading sessions. The PCR         stating any clear picture as well. OBV     investors who think that market is going to rise from the current levels in
                Having said that, there are a large     emerging on the GST sometime in             currently is at 1.07. It decreased from    has been on a decline after accumulat-     the forthcoming trading sessions. Also the above strategy will completely
           number of domestic concerns which            the near future. All the above men-         1.30 (fortnight ago) which signifies       ing in the beginning of the month.         minimize the downside of the investor. This strategy will give an outflow
           until resolved will prevent a major bull     tioned developments combined with           increasing open interest in Calls as       However, RSI, which is a momentum          of ~ Rs.350. Between 5600 and 5800, the maximum gain is ~7% at 5700
           rally from happening here. Rising            the good demographic profile of our         compared to that in Puts. PCR, a con-      indicator, is confined in a range after    levels. Above 5750, the strategy will incur losses.
           inflation with no visible solution in        country augur well for companies            trarian indicator for the markets, sug-    dropping to over sold zones in mid
           sight remains the chief concern for the      dealing with the domestic demand or         gests sluggish outlook in the forth-       of February month. Index is still trad-
           investing community. Continuing cri-         infrastructure development. Banking,        coming trading sessions. Also,             ing below 200 DMA and Index wit-
           sis in the Middle East will ensure that                                                                                             nessed crossover of 50 DMA and 200
           crude prices continue to remain firm.                                         NIFTY INDEX                                           DMA in the beginning of the month
           Foreign institutional investors, who                                                                                                concluding weakness in the market.
           have decided to go underweight in                                                                                                   Currently, Nifty finds near term sup-
           India till valuations look compelling                                                                                               port at 5237, while mid term resist-
           again, would also like to see some                                                                                                  ance is seen at 5621.
           concrete action on the reform process
           and infrastructure development before                                                                                               Put Call Concentration                     SELL 2 LOTS 5600 CALL @ Rs.15.75, BUY 1 LOT 5000 PUT @ Rs.4.4
           they change their stance on our mar-                                                                                                    Last few days were quite in dis-           The strategy will be the most useful for investors who have a sense
           kets. Poor governance and lack of an                                                                                                array. Political uncertainties, negative   that market will not sustain at the current levels and there will be a break-
           apt vision on the part of policy mak-                                                                                               cues from Middle East, Wikileaks and       down. It will give an initial inflow of ~Rs.1350.The gains will start esca-
           ers has never got highlighted more                                                                                                  the oppositions demand for PM’s res-       lating as Nifty starts moving below 5000.From 5000 to 5600, it will give a
           than at present. Government needs to                                                                                                ignation dragged the Nifty down.           constant return of 1.9%. And after 5600, the investor will start incurring loss-
           step in fast in order to restore                                                                                                    Moreover, the natural disaster in Japan    es. Investors are advised to cover the strategy once the Nifty reaches 5500
           creditability.                                                                                                                      and tensions in Libya have once again      so as to prevent from incurring losses.
                Though the tragedy in Japan does                                                                                               caused crude prices to climb. With
           not affect our economic growth in any                                                                                               inflation still above comfort levels,
           significant way, it does affect the flow                                                                                            rising commodity, coal and fuel prices
           of foreign funds into our markets in                                                                                                may hamper the domestic growth and
           the very near term. Lot of liquidity                                                                                                economic growth in the long run.
           invested by Japanese banks and funds                                                                                                    The VIX, which is hovering
           is likely to go back to aid the recon-                                                                                              around 22-25, is trading at higher lev-
           struction efforts.                                                                                                                  els contributing to the continued anx-
                 Despite all the negativity sur-                                                                                               iety amongst the investors. The Put-
           rounding us at present, India's long                                                                                                Call open interest ratio for index
           24   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                              1-15 April, 2011   MONEY MANTRA   25
EP-20-37--_Alok.qxd      3/29/2011         2:00 PM       Page 8

           BROKER’S PICKS                                                                                                                                                                                                               BROKER’S PICKS
           Blue Star                                         BUY CMP: Rs.338.90                  TARGET: Rs.450 (12 months)                   Opto Circuits (India)                  BUY CMP: Rs.283.20 TARGET: Rs.290+

           Ready to reap profit going forward                                                                                                 With better numbers under the belt
                                                                                                                                                 Rajesh Jain                                            Opto Circuits : 3 months performance
                Ashish Kapur
                                                                           Blue Star: 3 months performance
                                                                                                                                              Currently the world markets are quite
           Blue Star is the largest central air-con-                                                                                          volatile due to the Japan crises and
           ditioning and commercial refrigera-                                                                                                mid-east problem. Indian stock mar-
           tion company in India. Blue Star is                                                                                                kets which had been underperforming
           mainly engaged in the business of air-                                                                                             are trying to consolidate at current lev-
           conditioning & refrigeration related                                                                                               els. In such a scenario one can look
           projects and cooling products. It pri-                                                                                             to buy good stocks in small quantity
           marily focuses on the corporate and                                                                                                at lower levels. Expect the market to
           commercial markets. These include                                                                                                  remain volatile and do not look for
           institutional, industrial and govern-                                                                                              very high profits in such markets.
           ment organizations as well as com-                                                                                                      The company operates in the med-
           mercial establishments.                                                                                                            ical electronics space and manufac-
                                                                                                                                              tures optical sensors, security systems
           Investment Rationale                                                                                                               and optoelectronic equipment. It also
                Flourishing Industry-India has                                                                                                undertakes design of optoelectronic
           the fastest-growing middle-class soci-                                                                                             devices. On consolidated basis, the
           ety in Asia. The country's middle-                                                                                                 company reported net profit of
           income group is expected to grow19%                                                                                                Rs.95.68 crore in the quarter ended         previous quarter ended December                The stock of Opto Circuits has
           a year for the next five years and with                                                                                            December 2010 as against Rs.65.68           2009. However, its 9 Month perform-        taken a rally when markets were
           this, the discretionary spending in             Naseer Electricals (electrical con-       hotels, hospitals, educational insti-    crore during the previous quarter           ance was also robust. Net profit for the   falling. It has support between 260-
           India is also expected to increase              tracting)      and      DS       Gupta    tutions etc. with further strengthen-    ended December 2009. Net Sales              company jumped by 33.5 per cent to         270 levels where one can accumulate
           18% every year. Rising incomes                  Construction (plumbing contracting        ing of spending. The management is       increased to Rs.417.66 crore during         Rs.256.15 crore while net sales also       keeping a closing stoploss of 250 for
           among consumers in a flourishing                firm and fire fighting). These acqui-     confident of having a strong Q4 and      the quarter ended December 2010 as          was up 40.1 per cent to Rs.1014.02         higher targets of 290 plus in the com-
           economy along with rising summer                sitions have enabled the company to       year ahead in terms of profitability     against Rs.257.03 crore during the          crore (YoY).                               ing weeks.
           temperatures across the country and             execute entire electromechanical          by increasing its presence in high
           increasing affordability are expect-            project contracts on its own. These       growth residential market.
           ed to drive up demand for ACs in the            moves have enabled Blue Star to               Order Book: The order book
                                                                                                                                              M&M                                         BUY       CMP: Rs.664.35                   TARGET: Rs.700+
           country for several years. Blue Star            deliver integrated mechanical, elec-      position for the company is Rs.2000
           is surely going to be benefited from
           this as it is aggressively foraying in
           the Residential Market.
                                                           trical, plumbing and fire fighting
                                                           contracting projects for commercial
                                                           buildings and infrastructure seg-
                                                                                                     crore (Excluding DS Gupta) after
                                                                                                     2QFY11 up 10% yoy, to be execut-
                                                                                                     ed in the next ~15 months. Order
                                                                                                                                              Betting big on acquisition
               Product Portfolio: Blue Star                ments.                                    book for DS Gupta stands at Rs.250           Recently Mahindra & Mahindra                              M&M : 3 months performance
           has strengthened its product port-                  Result Update: Blue Star              crore with an execution period of 15-    has completed all formalities to com-
           folio by buying companies such as               reported 23% Y-o-Y increase in            18 months.                               plete the acquisition of SsangYong
                                                           sales for the quarter (to Rs.6.9 bil-         Triggers: 1. Improved revenue        Motor Company and set target sales
            Key Indicators (As on Mar 24, 2011)            lion), with a strong revival in profes-   booking from previously stalled          of 121,000 SsangYong vehicles this
           Face Value (Rs.)        2                       sional electronics and industrial         projects. 2. Positive impact of          year an increase of 50 per cent over
           Closing Price (Rs.)           338.90            equipment segment and 29 per cent         upward price revisions (to the tune      last year. A substantial portion of the
           52 week H/L(Rs.)              553.65/316.10
                                                           growth in cooling products segment.       of 3-5% affected since October 10).      increased sales will come from the
                                                           However, operating margins have           3.     Robust      demand       from     new sports utility vehicle.
           Market Cap (Rs. Crore)        3047.93
                                                           been under pressure due to higher         RAC market.                                  M&M reported net profit of
           EPS (TTM) (Rs.)               19.65             material cost, adverse sales mix and                                               Rs.734.68 crore in the quarter ended
           BV per Share (Rs.)            54.67             stricter provisioning for bad debts.      Outlook and valuation                    December 2010 as against Rs.413.70
           P/B                           6.20              Net Profit was lower by 47 per cent           With execution picking up at pre-    crore during the previous quarter
           P/E                           17.25             at Rs.223.6 million compared to           viously stalled projects, manage-        ended December 2009. Net Sales
                                                           Rs.423.4 million in the same peri-        ment's focus on non-commercial sec-      increased to Rs.6074.46 crore in the
            Shareholding Pattern (in %)                    od last year mainly because of mar-       tors and foraying into other countries   quarter ended December 2010 as
            (As on Dec 31, 2010)                           ginal top line growth, higher operat-     like China will help the company in      against Rs.4478.70 crore during the
            Promoters                   40.12              ing expenses and increase in inter-       reaping profits going forward. At the    previous quarter ended December
            FIIs                         6.72              est costs.                                current market price of Rs.324, the      2009. However, its 9 Month perform-         up by Rs 16509.89 crore vs. 13173.16       mulate with a closing stoploss of 590
            DIIs                        12.48                  Robust Outlook: Despite lan-          stock is trading at 20x FY11E and        ance was also robust. Net profit            crore (YoY).                               for targets of 700+ in coming weeks.
            Others                      40.68              guishing results, demand outlook          15x FY12E earnings and is expected       jumped by Rs.2055.56 crore vs. Rs.              The stock has a lot of supports at
            Total                       100.0                                                                                                                                                                                            (Writer is Head of Research (Retail) at
                                                           remains firm from sectors such as         to reach Rs.450 in a year's time.        1517.49 crore, while net sales also was     600-620 levels, where one can accu-                                  Religare Securities)
           26    MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                               1-15 April, 2011 MONEY MANTRA 27
EP-20-37--_Alok.qxd     3/29/2011          2:00 PM   Page 10

           BROKER’S PICKS                                                                                                                                                                                                            BROKER’S PICKS
           SKF India                                           BUY CMP: Rs.562.85 TARGET: Rs.629.45                                          Punjab National Bank                        BUY        CMP: Rs.1122.45 TARGET: Rs.1370

           Going for better product mix                                                                                                         Banking on superior CASA
                Jagannadham Thunuguntla                                        SKF India : 3 months performance                                Amar Ambani
                                                                                                                                                                                             Punjab National Bank : 3 months performance
               SKF India is a part of the SKF Group, the leading glob-                                                                           PNB’s loan growth is set to remain
           al supplier of rolling bearing and seals. Along with a var-                                                                       robust at 25% in FY11 despite a slight
           ied range of products it also offers extensive solutions                                                                          moderation in Q4 FY11. In FY12,
           and services in this area. SKF also has an increasingly                                                                           credit growth would continue to be
           important position in the market for linear motion prod-                                                                          higher than system. C/D ratio is
           ucts, high precision bearings, spindles and spindle serv-                                                                         expected to correct with deposits
           ices for the machine tool industry, electrical actuators &                                                                        mobilization having improved in
           actuation systems and is an established producer of rolling                                                                       recent months. The bank is confident
           bearing steel. The company supplies bearings to the auto                                                                          of sustaining CASA near 39% despite
           and industrial sectors from its plants in Pune, Bangalore                                                                         migration to TDs. NIMs, after being
           and Haridwar. Revenue of the company is equally split                                                                             resilient in Q4 FY11, are anticipated
           between automotive and non-automotive segments.                to the railways, wind power generation, mining, construc-          to witness a modest correction. In the
                                                                          tion and material handling equipment, power transmission           longer term, PNB sees NIM at 3.5-
           Investment Rationale                                           and industrial electrical sectors. The unit will help meet         3.7%, a conservative band in our view.
               SKF India has set up a plant in Haridwar with an invest-   the growing demand from the domestic market, besides                   However, like peers, bank is con-
           ment of Rs. 150 crore. It has been set up on 10 acres          strengthening the Swedish company's manufacturing                  templating to reverse substantial gra-
           and will have the production capacity of 60 million            presence in the heavy industrial segment in Asia.                  tuity provisions. RoA and RoE are        plans to grow at least 2-3% above the     implemented in the past six months.
           bearings per year after being fully operational. The plant          SKF India plans to boost its capex for the year to            estimated to remain impressive at 1.3-   system. It has witnessed improvement      Bank has been offering competitive
           will add a sales turnover of Rs. 50 crore for 2010-2011.       Rs.160 crore from Rs.100 crore a year ago and ramp                 1.4% and 23-25% respectively over        in core term deposits mobilization        rates mainly on the special term
           SKF (Sweden) is planning full capacity utilisation at its      up operations at its three units thus jacking up capacity          FY10-13. We expect bank to deliver       aided by the material rate hikes imple-   deposits of 500, 1000 and 1,111 days
           Ahmedabad plant by 2012 with an investment of Rs. 270          by 25%-30% in 2011 across its units. Net profit of                 20% PAT CAGR in the aforesaid peri-      mented. It expects significant increase   and these deposits currently form <5%
           crore. The facility, set up by SKF Technologies India, an      SKF India during the quarter ended December 2010 rose              od. Retain BUY on PNB with 9-month       in institutional deposits in March. So,   of total deposits. Higher CASAshould
           associate firm of SKF India, proposes to manufacture           41.30% to Rs. 43.93 crore on Y-o-Y basis. Sales rose by            target of Rs1,370.                       the C/D ratio is expected to correct      dilute the impact of bulk deposits
           medium-large size bearings of different types. It will cater   15.54% to Rs. 536.30 crore during the period.                      Loan growth to decelerate yet            to 75% over the next 3-6 months.          (20% of total deposits) re-pricing.
                                                                                                                                             remains strong: With YTD credit          Confident about maintaining               Bank estimates its CoD to increase
                                                                                                                                             expansion at 18.6%, PNB has wit-         CASA near 39%: Despite the sig-           by 11- 12bps in Q4 FY11 and further
           Bank of Baroda                                  BUY      CMP: Rs.905 TARGET: Rs.1020.55                                           nessed higher than system loan           nificant increase in TD rates, PNB is     15bps in Q1 FY12. It does not expect
                                                                                                                                             growth. The yoy credit growth for the    confident about maintaining CASA          any further rate hikes in the near term.

           More thrust on Northern & Gujarat zones                                                                                           bank in Q3 FY11 was at a robust 30%.
                                                                                                                                             The growth momentum is expected to
                                                                                                                                             decelerate to 25% in Q4 FY11 main-
                                                                                                                                                                                      near 39%. Presently, bank’s CASA
                                                                                                                                                                                      ratio is second only to SBI amongst
                                                                                                                                                                                      PSBs. The bank has been able to sus-
                                                                                                                                                                                                                                     YoA may see a decent uptick
                                                                                                                                                                                                                                over the next two quarters: Over the
                                                                                                                                                                                                                                past six months, PNB has increased
               Bank of Baroda (BoB), incorporated in 1908, has             Bank of Baroda : 3 months performance                             ly due to the higher base (advances      tain CASA around 40% consistently         BPLR by 200 bps and Base Rate by
           grown as a financial conglomerate through organic                                                                                 grew by significant 9.5% qoq in Q4       over the past many quarters. PNB’s        150 bps. As a significant portion of
           growth and mergers & acquisitions. BoB is a premier                                                                               FY10). PNB expects system credit         dominant presence in Northern India       these increases was announced in
           Public Sector bank in India with the Govt. of India hold-                                                                         growth to moderate to 20-21% by the      offers the bank a structural advantage    December and January, the reported
           ing a majority stake of around 58%. Bank's network of                                                                             end of the year. In FY12, the bank       over peers. To retain CASA, it plans      YoA was flat qoq in Q3 FY11. It is
           domestic branches as on 31st December, 2010 was 3,259                                                                              Key Indicators (As on Mar 24, 2011)     to add 400-450 branches in FY12.          expected to improve by 15-20bps in
           & number of ATMs were 1,521. Bank was present in 25                                                                               Face Value (Rs.)        10               Rural branches take more time to          Q4 FY11. About 81% of the bank’s
           countries (other than India) with 82 offices.                                                                                     Closing Price (Rs.)      1122.45         breakeven: While urban branches           advances are floating (59% linked to
                                                                                                                                                                                      turn around in the first year of opera-   BPLR and 22% linked to Base Rate)
           Investment Rationale                                                                                                              52 week H/L(Rs.)         1395/933
                                                                                                                                                                                      tion, the bank says its rural branches    and hence get immediately re-priced.
                                                                                                                                             Market Cap (Rs. Crore)   35391.13
               Global business has improved by 32% to Rs. 4,88,721                                                                                                                    take 2-3 years to break-even despite           NIM resilient in Q4 FY11: PNB
           Crore in the quarter ended December 2010. The domes-                                                                              EPS (TTM) (Rs.)          138.52          significantly lower overheads. The        does not see its NIM being material-
           tic business has reported 30% increase at Rs. 3,67,417                                                                            BV per Share (Rs.)       514.77          break-even period for rural branches      ly impacted in the near term and
           Crore, while that of overseas business leaped up by 36%        es during FY12. Newly opened branches till end-Dec'10              P/B                      2.18            is elongated by substantially lower       expects a rather modest correction of
           to Rs. 1,21,304 Crore in the quarter. Capital Adequacy ratio   are well-diversified across India with more thrust on              P/E                      8.10            interest income (lower NIM due to         10-15 bps over next two quarters from
           stood at 12.45% with tier-I capital of 7.7% in quarter.        Northern & Gujarat zones.                                                                                   lending rate capping) and time lag        current level of 4%. Over the longer
           The size of Bank's risk-weighted assets was Rs.1,96,041            BoB and BBVA (Banco Bilbao Vizcaya Argentaria)                  Shareholding Pattern (in %)             (typically 6-month) in receiving inter-   term, bank expects NIM to settle in the
           crore as on December 31, 2010. The bank proposes to            have signed a MoU to form a joint venture in credit card            (As on Dec 31, 2010)                    est subvention from the government.       range of 3.5-3.7%. We believe this
           maintain its CRAR in the band of 13% to 13.5% in the com-      business. Upon regulatory approval, the agreement                   Promoters                   57.80            CoD may not increase steeply         margin outlook is conservative given
           ing years (with the tier-I between 8% and 8.5%).               between both entities will allow BBVA to acquire a 51%              FIIs                        19.42       in the near term: PNB’s CoD is            bank’s superior CASAand higher pro-
               Bank proposes to open 250 branches in Q4 FY11 with         stake in the existing credit card unit of Bank of Baroda,           DIIs                        17.69       unlikely to increase substantially in     portion offloating advances.
           81 in Metro, 48 in Urban, 98 in Semi-Urban & 23 in Rural       BOBCARDS, for a total consideration of 34 million euros.            Others                       5.09       the next two quarters despite the sig-
                                                                                                                                              Total                       100.0                                                                (Writer is Head of Research
           areas. Bank has a well-crystalised plan to open 614 branch-               (Writer is Strategist & Head of Research, SMC Global)                                            nificant hike in term deposits rates                              with India Infoline)
           28   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                          1-15 April, 2011   MONEY MANTRA   29
EP-20-37--_Alok.qxd      3/29/2011          2:00 PM    Page 12

            BROKER’S PICKS
           ICICI Bank                                          BUY CMP: Rs.1052.85                    TARGET: Rs.1312                                Bajaj Auto                         TRADING RANGE FOR THE NEXT QUARTER: RS.1324 - RS.1440

           Improving its market share                                                                                                                Rural markets to register better growth
                Vaibhav Agrawal                                         ICICI Bank : 3 months performance                                               Sneha Venkaraman                                     Bajaj Auto : 3 months performance
           Improved deposit mix to reflect in                                                                                                        The Bajaj Group is amongst the top 10
           better NIMs: ICICI Bank is execut-                                                                                                        business houses in India. The group's
           ing a credible strategy of consolida-                                                                                                     flagship company, Bajaj Auto (BAL),
           tion that will drive materially                                                                                                           is ranked as the world's fourth largest
           improved balance sheet and earnings                                                                                                       two and three wheeler maker and the
           quality over the next two years. The                                                                                                      Bajaj brand is well-known across sev-
           distinguishing feature of the bank's                                                                                                      eral countries in Latin America,
           performance in FY2010 was the                                                                                                             Africa, Middle East, South and South
           improvement in CASA ratio to 42%                                                                                                          East Asia. The second largest two-
           (which is transformative, consider-                                                                                                       wheeler maker in India, the erstwhile
           ing that the ratio was as low as 22%                                                                                                      scooter company has re-invented
           at the end of FY2007 and 29% even                                                                                                         itself by “re-innovating” its product
           as recently as FY2009). The ratio fur-                                                                                                    range to turn into the second-largest
           ther improved to 44.2% in 3QFY2011.                                                                                                       motorcycle maker in India. Apart from
           In light of this change in the liability                                                                                                  its two-wheeler business, the Group
           mix, we expect the bank's NIMs to                                                                                                         has, through Bajaj Auto Finance,          Robust       demand      conditions:    planned in the motorcycle and three-
           improve to 2.6-2.8% over FY2011 and                                                                                                       diversified into two-wheeler financ-      Demand for motorcycles is dependent     wheeler segment, has managed to
           FY2012.                                                                                                                                   ing. With the opening up of insurance     to a large extent on increase in the    regain its lost market share from 24%
               Well positioned to garner strong                                                                                                      sector, the group has entered into a      addressable households in the rural     in FY10 to 31% in December 2010.
           market share gains in CASA                                                   Key Financials                                               JV with Allianz AG, Germany.              areas and higher penetration in the     Ramp up of Pantnagar facility could
           deposits: In our view, the bank's sub-        Y/E March (` cr)   FY2009          FY2010            FY2011E           FY2012E              Diversified product portfolio:            urban markets. Shift in buyer prefer-   result in increase in volumes and
           stantial branch expansion (1,508              NII                9,092           8,114             8,889             11,144               Among two-wheelers, BAL has the           ence towards a family vehicle is        lower tax thereby giving an impetus to
           branches added from 3QFY2008 to               % chg              10.9            (10.8)            9.5               25.4                 most diversified product portfolio        another trigger for demand. 55% of      Net Profit margins. However, rising
           2QFY2011, including the entire                Net profit         3,423           4,025             5,218             6,993
                                                                                                                                                     with the highest share of three wheel-    BAL’s consumers are from rural areas.   commodity prices could put pressure
           branch network of BoR) and strong                                                                                                         ers and exports of two-wheelers. The      With major crops witnessing good        on operating Margins.
                                                         % chg              (17.7)          17.6              29.6              34.0
           capital adequacy at 20% (Tier-I at                                                                                                        management has indicated the market       growth in production in FY10 and            With focus of 2 key brands-
           13.7%) have positioned it to gain mar-        NIM (%)            2.6             2.4               2.6               2.8                  share could rise from to 34% in FY11      MSP seeing a rise, BAL could see fur-   Discover 100cc and Pulsar 135cc,
           ket share in CASA and credit, respec-         EPS (`)            30.7            36.1              45.3              60.7                 from 24% in FY10. Currently BAL’s         ther growth from these areas in FY11.   BAL’s management is confident of
           tively. In fact, the bank has once again      P/E (x)            32.8            27.9              22.2              16.6                 market share stands at 30.9%. This        There is strong demand expected from    achieving 20%+ margin at the oper-
           started gaining market share in sav-          P/ABV (x)          2.4             2.2               2.1               2.0                  would largely insulate BAL from           these regions on account of good mon-   ating level in FY11 and FY12. Pulsar
           ings accounts; during FY2010, the             RoA (%)            0.9             1.0               1.3               1.5                  vagaries of any particular business or    soon in 2010-11.                        is expected to grow even in the wake
           bank improved its market share of sav-        RoE (%)            9.2             9.7               12.3              15.8                 geography. By April 2011, BAL plans                                               of increased competition from Honda
           ings deposits by 10bp over FY2009                                                                                                         to launch a new Discover (model) and      Outlook and valuation                   post the JV split. It could continue to
                                                                                       Source: Company, Angel Research; Price as on March 11, 2011
           levels, capturing a substantial 5.4%                                                                                                      two more models could be launched             Two-wheeler sales improved in       remain the market leader.
           incremental market share.                         Worst of asset quality issues           relatively stronger earnings growth             at around Diwali 2011.                    FY10, owing to the various measures         However, Discover has seen a
            Key Indicators (As on Mar 24, 2011)          over: The bank's asset quality showed       momentum. We expect the bank to                  Key Indicators (As on Mar 24, 2011)      by the government and positive devel-   tapering in volumes, which contin-
           Face Value (Rs.)        10                    further improvement in 3QFY2011,            deliver a strong earnings CAGR of               Face Value (Rs.)        10                opments on the macro-economic           ues to remain in the price elastic seg-
                                                         with gross NPAs increasing just mar-        29.7% over FY2010-12 and RoE of                                                           front. Although the substantial own-    ment mass-market segment. It is los-
           Closing Price (Rs.)           1052.85                                                                                                     Closing Price (Rs.)       1353.30
                                                         ginally by 0.4% qoq and net NPAs            15.8% by FY2012. At the CMP, with-                                                        ership base of two-wheelers results     ing market share in this segment post
           52 week H/L(Rs.)              1277/803.30     declining from the peak of Rs.4,608cr       out adjusting value of subsidiaries, the        52 week H/L(Rs.)          1664.50/935     in reduced headroom for higher dou-     the aggressive entry of Honda. Its var-
           Market Cap (Rs. Crore)        121227.49       in 1QFY2010 to Rs.2,873cr in                stock is trading at 2.0x FY2012E ABV            Market Cap (Rs. Crore)    39160.04        ble-digit growth rates, the increased   ious cost cutting measures could
           EPS (TTM) (Rs.)               40.86           3QFY2011. NPA provisions-to-aver-           (2.2x post-adjustment).                         EPS (TTM) (Rs.)           85.29           dependence on replacement demand        reduce the pressure of rise in commod-
           BV per Share (Rs.)            448.62          age assets declined to 0.5% in                  We have valued the subsidiaries at          BV per Share (Rs.)        101.20          is expected to sustain volumes.         ity prices on the margins. Post split
           P/B                           2.35
                                                         3QFY2011 from 1.2% in FY2010. We            Rs.204/share and the core bank at               P/B                       13.37
                                                                                                                                                                                               Moreover, the rural markets are         at Hero Honda and the recent negative
                                                         expect NPA provisions-to-average            Rs.1,108 (3.0x FY2012E ABV). We                                                           expected to register better growth on   news flow about the transfer of
           P/E                           25.77                                                                                                       P/E                       15.87
                                                         assets to dip to 0.4% by FY2012, driv-      maintain our Buy recommendation on                                                        account of the new demand arising       Honda’s stake to Hero Honda’s pro-
            Shareholding Pattern (in %)                  ing an improvement in RoA to 1.5%.          the stock with a Target Price of                 Shareholding Pattern (in %)              from the rural population, which is     moters at a huge discount to CMP,
            (As on Dec 31, 2010)                                                                     Rs.1,312. Moreover, the bank's quar-             (As on Dec 31, 2010)                     expected to help two-wheeler com-       BAL could see some default buying.
            Promoters                       -
                                                         Outlook and valuation                       terly earnings progression is expected           Promoters                   49.66        panies in maintaining their growth      At the CMP, the stock of Bajaj Auto
            FIIs                        39.23                Keeping in mind the rising inter-       to be strong, which may lead to further          FIIs                        17.77        momentum, registering an 8-9%           is trading at 13.8x FY12E EPS of
            DIIs                        23.43            est rate environment, ICICI Bank's          rerating of the stock.                           DIIs                         6.24        CAGR in volumes over next few           Rs.101.3.
            Others                      37.34            high CASA ratios and CASA market                                                             Others                      26.33        years.
                                                                                                                        (Writer is associated                                                                                                            (Writer is associated with
            Total                       100.0            share gains are expected to underpin                                                         Total                       100.0            BAL with multiple new launches                               HDFC Securities)
                                                                                                                         with Angel Broking)
           30    MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                1-15 April, 2011   MONEY MANTRA   31
EP-20-37--_Alok.qxd      3/29/2011         2:00 PM    Page 14

           Aurobindo Pharma

           With a robust pipeline
                                                      BUY CMP: Rs.199.70                      TARGET: Rs.257
                Siddhant Khandekar                                                                                                                                                                                                                                                                                                       Inflation
                                                                  Aurobindo Pharma : 3 months performance                                                        Quarterly GDP growth
           Aurobindo Pharma is a leading inte-                                                                                                                                                                                                                                                          12.0
                                                                                                                                                                                       GDP(LHS)                              GDP Growth % (RHS)                                                                      (%)
           grated pharmaceutical company with                                                                                                      14,000                                                                                                                                   13.0
                                                                                                                                                                         (Rs bn)                                                                                            (%)                         10.0
           a strong presence in antibiotics, car-                                                                                                  13,000
           diovascular (CVS), central nervous                                                                                                      12,000
           system (CNS), gastroenterological                                                                                                                                                                                                                                                11.0         8.0
           (GI) and anti retrovirals (ARVs) ther-                                                                                                  10,000                                                                                                                                                6.0
           apeutic segments. It markets these
                                                                                                                                                    9,000                                                                                                                                   9.0
           products in over 125 countries. APL                                                                                                                                                                                                                                                           4.0
           has transformed itself from a pure
           plain-vanilla API supplier (in FY02)                                                                                                     7,000                                                                                                                                                2.0
                                                                                                                                                    6,000                                                                                                                                   7.0
           into an integrated pharmaceutical
           company resulting in a significant                                                                                                       5,000
           improvement in EBITDA margins.                                                                                                           4,000                                                                                                                                   5.0         (2.0)





           Robust pipeline in US market:APL



           has filed 195 ANDAs with the
           USFDA and received final approval
           for 97 ANDAs and tentative
           approvals for 29 ANDAs. So far, it                                       Valuation Metrics
           has launched 67 products. APL is             (Year-end March)           FY09           FY10      FY11E      FY12E        FY13E
                                                                                                                                                                                                CRR, Repo                                                                                               IIP and Six Key Infra Ind. growth
           planning to file 120 ANDAs over the
                                                        Net Sales (| crore)        3,077.3        3,575.4   4,318.1    4,991.9      5,720.1         7.0                                                                                                            Repo
           next three years, which will drive                                                                                                                      (%)                                    CRR                                                                                                                     IIP growth                       Six key infra Ind growth (%)
                                                                                                                                                                                                                                                                                                         12                                                                                                               20.0
                                                        EBITDA (| crore)           516.4          823.2     974.5      1,149.4      1,379.0         6.5                                                                                                                                                                                                                                                                   18.0
               Supply agreement with MNCs:                                                                                                                                                                                                                                                               10
                                                        Net Profit (| crore)       100.2          563.4     559.8      641.8        830.8                                                                                                                                                                                                                                                                                 16.0
           APL entered into a licensing and sup-
                                                                                                                                                    6.0                                                                                                                                                                                                                                                                   14.0
           ply agreement with leading MNCs,                                                                                                                                                                                                                                                               8
                                                        EPS (|)                    3.4            19.4      19.2       22.0         28.5                                                                                                                                                                                                                                                                                  12.0
           Pfizer Inc and AstraZeneca. Under                                                                                                        5.5
           the Pfizer deal, Pfizer will market          P/E (x)                    55.7           9.9       10.0       8.7          6.7                                                                                                                                                                   6                                                                                                               10.0
           over 100 products in the US, 30 EU                                                                                                       5.0                                                                                                                                                                                                                                                                   8.0
                                                        Price / Book (x)           4.5            3.0       2.3        2.0          1.6                                                                                                                                                                   4
           countries and 110 ROW countries.                                                                                                                                                                                                                                                                                                                                                                               6.0
           Pfizer is also looking forward to tak-       EV/EBITDA (x)              15.1           9.3       7.9        6.5          5.3             4.5                                                                                                                                                                                                                                                                   4.0
           ing this deal into Japanese and                                                                                                                                                                                                                                                                                                                                                                                2.0
                                                        RoCE (%)                   10.9           16.9      16.0       19.8         21.5
           Korean markets in the near future.                                                                                                       4.0                                                                                                                                                   0                                                                                                               0.0
           Under the deal with AstraZeneca,             RoE (%)                    8.1            30.8      23.0       23.6         24.0




                                                                                                                                                                                                                                                                                                                                                                          May -10








           APL will supply solid dosage and
           sterile products while AstraZeneca           ing markets.                                developments.
           will market these products in emerg-         Higher capacity utilisation in near         Valuations:APL is currently trading
            Key Indicators (As on Mar 24, 2011)         future: APL owns 16 manufactur-             at a steep discount to its industry                                                                         FDI                                                                                                        Currency movement
           Face Value (Rs.)        1                    ing facilities in India, US, China and      peers due to the recent melt down and
           Closing Price (Rs.)           199.70         Brazil. The current capacity utilisa-       legacy issues like API model and weak           4,000           (USS mn)                                                                                                                            100.0                            INR/USD                               INR/EURO
           52 week H/L(Rs.)              275/156.50
                                                        tion in case of formulations is still       balance sheet. Despite the import alert
                                                        at ~35-40%. This is slated to change        for one facility, we believe other issues                                                                                                                                                            90.0                                                                  INR/100 Yen
           Market Cap (Rs. Crore)        5825.34
                                                        on account of existing and forthcom-        like transformation from API driven             3,000                                                                                                                                                80.0
           EPS (TTM) (Rs.)               20.07          ing deals with MNCs. As many as 11          model to generic formulations, incre-
           BV per Share (Rs.)            65.80          facilities have been approved by the        mental capacity utilisation, monetisa-                                                                                                                                                               70.0
           P/B                           3.04           USFDA.                                      tion of the growing ANDApipeline and            2,000                                                                                                                                                60.0
           P/E                           9.97               We expect the formulations-API          recent deals with leading MNCs will
                                                        ratio to improve from 46:54 in FY09         remain intact. We expect the valuation                                                                                                                                                               50.0
            Shareholding Pattern (in %)                 to 66:34 by FY13E. Similarly, we also       gap to narrow down, going forward.              1,000                                                                                                                                                40.0
            (As on Dec 31, 2010)                        expect capacity utilisation to improve      We value APL at Rs 257, based on
            Promoters                   54.40           on account of successful regulatory         9x FY13E EPS of Rs 28.5. We are ini-
            FIIs                        26.37           approvals for both facilities and prod-     tiating coverage on the stock with a                                                                                                                                                                 20.0
            DIIs                         9.43






                                                        ucts. We expect EBITDA margins to           `Strong Buy` rating.







            Others                       9.80           improve from 16.8% in FY09 to
            Total                       100.0                                                                         (Writer is associated with
                                                        24.1% in FY13E on account of these                                    ICICIDirect.com)
           32    MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                                                                                                                                   1-15 April, 2011          MONEY MANTRA                          33
EP-20-37--_Alok.qxd     3/29/2011         2:00 PM       Page 16

           SYSTEMATIC INVESTMENT PLAN IN E-SERIES                                                                                                                      Technical Report
                Anjani Sinha                              Why to choose SIP in E-                       to Rs 5500 in the case of E-silver.                                       PIVOT
                                                                                                      Example of SIP: Suppose one like            Stocks       Close        S2         S1    Pivot            R1                   R2
               E-Series products of NSEL rede-                                                        to invest Rs.5000 per month in the e
                                                                                                                                                  SENSEX       17839      17528      17684   17947         18103                 18367
           fined the investment with an option            1-Regular saving habit: Perhaps             gold. If he opts for SIP he will have
                                                          the best benefit of setting up an E-                                                    NIFTY         5364       5305       5334    5374          5404                  5443
           to include commodities in the port-                                                        more unit by the end of one year rather
                                                          Series SIP is that it forces one to set                                                 ABB            742        721        732     750           761                   779
           folio conveniently and in seamless                                                         than saving cash every month and pur-
           manner. Taking it forward the                  apart some money every month and            chasing after one year. Through above       ACC           1022       1007       1014    1022          1029                  1036
           exchange has now introduced system-            enforces saving discipline. One may         table we decipher that total units pur-     AMBUJACEM      129        125        127     130           133                   136
           atic investment plan (SIP) scheme              argue that this can be done without a       chased in one year through SIP comes        AXISBANK      1279       1248       1264    1277          1293                  1306
           enabling investors to keep investing in        SIP also but just that automation           out to be 31.15. While the same             BHARTIARTL     317        313        315     318           320                   323
           the same way as they do in equity mar-         enforces a little more rigor.               amount of money he invests on 1st           BHEL          1920       1902       1911    1923          1932                  1944
           ket. Introducing SIP is aimed to cul-          2- Protects from timing the market:         March we will get only 28.04 units.         BPCL           564        545        554     563           572                   581
           tivate a regular savings habit among           If one has already committed money                                                      CAIRN          349        344        347     350           353                   356
           investors to accumulate commodity in           to a SIP in E-Series - he will most like-   Major benefit of SIP in E-                  CIPLA          288        280        284     290           293                   299
           small amount. The idea is to provide           ly continue to invest regardless of a       Gold and E-Silver                           DLF            222        215        218     221           224                   227
           a mechanism to retail investors to set         big fall or huge gains in the price. This        Buying gold and silver as SIP          GAIL           450        445        448     451           453                   456
           apart a sum every month or quarter             in turn will enable to invest regularly     through E-Series serves the purpose         HCL TECH       451        445        448     452           455                   459
           as per choice, and use that to buy E-          rather than try to time the market,         of savings for a household and invest-
                                                                                                                                                  HDFC           626        618        622     627           631                   636
           series units, regardless of its price. The     which not many small investors can          ment requirement of investors as well.
                                                                                                                                                  HDFC BANK     2154       2128       2141    2160          2173                  2192
           E-Series products SIP offer is a con-          do successfully.                            Investors holding the E-series prod-
           venient way to diversify investment            3-SIP lead to building wealth: Good         ucts in demat has option to get the         HEROHONDA     1434       1379       1407    1450          1478                  1521
           portfolio and reap the returns of gold,        saving and investing habits are more        physical delivery of the same. It is use-   HINDALCO       191        184        188     193           196                   202
           silver and other commodities from a            likely to help to accumulate wealth         ful for who saves money for purchase        HINDUNILVR     266        261        264     267           270                   273
           long-term perspective. The invest-             in the long run.                            of gold for children's marriage.            ICICI BANK    1004        989        996    1004          1012                  1020
           ment objective of the scheme is to pro-                                                    Instead of savings money for purchase       IDEA            61         60         60      61            62                    63
           vide returns that correspond to the            Benefits of E-Series SIP:                   in the future, purchase of Gold units       IDFC           143        139        141     144           146                   148
           returns in physical commodity.                   SIP Styled Investments.                   will enable fetch more gold units from      INFOSYSTCH    2922       2875       2899    2928          2951                  2981
           Investors           can           directly       Diversified investment with               the same amount of money and these          ITC            168        166        167     168           169                   171
           subscribe/redeem E- series units on all          Compounding effect.                       gold units converted into physical          JINDALSTEL     662        645        654     661           669                   677
           business days through the physical               Option to Invest in Gold, silver,         jewellery when required.                    JPASSOCIAT      83         81         82      83            84                    84
           mode at the various designated cen-              copper, lead, zinc etc.                        Investing in E-Gold/silver and         KOTAK BANK     421        413        417     421           425                   429
                                 ters across the            Option to purchase Gold/silver            other E-Series products through SIP
                                                                                                                                                  LT            1506       1485       1495    1513          1524                  1541
                                     country,               Bars/Coins at the time of redemp-         give all the advantages of investing
                                                                                                                                                  M&M            641        621        631     638           648                   655
                                        thereby,            tion of E-Gold/silver units.              in gold and silver while eliminating
                                         making it          Wide Array of Portfolio Selections.       drawbacks of physical gold/silver -         MARUTI        1128       1095       1111    1139          1155                  1183
                                         easily              The Investor holds his investment        cost of storage, liquidity and purity. E-   NTPC           173        171        172     174           175                   177
                                            accessi-        in a Demat Account.                       gold/silver allows investment in gold       ONGC           270        264        267     270           273                   276
                                             ble and         Investment amount starts as low          and silver in small denominations,          PNB           1086       1062       1074    1091          1103                  1119
                                             conven-        as Rs. 150 in the case of E-Zinc          which makes it easy on the wallet.          POWERGRID       97         97         97      98            98                    98
                                            ient.                                                                                                 RANBAXY        436        410        423     447           460                   485
                                                                                        Lump sum Investment:                                      RCOM           103        100        101     104           105                   107
                                                           Purchase date       Buy Price of e-Gold     Investment         Purchased Units         RELCAPITAL     573        556        564     574           583                   593
                                                           1-Mar-11            2139.50                 60000              28.04                   RELIANCE       990        972        981     990          1000                  1009
                                                                                        Systematic Investment:
                                                                                                                                                  RELINFRA       624        606        615     626           635                   646
                                                           Purchase date       Buy Price of e-Gold     Investment         Purchased Units
                                                                                                                                                  RPOWER         119        114        116     120           122                   126
                                                           1-Apr-10            1671.1                  5000               2.99
                                                                                                                                                  SAIL           160        154        157     159           162                   164
                                                           1-May-10            1749.6                  5000               2.86
                                                                                                                                                  SBIN          2583       2543       2563    2589          2609                  2634
                                                           1-Jun-10            1918.1                  5000               2.61
                                                           1-Jul-10            1897.2                  5000               2.64                    SIEMENS        870        861        865     869           874                   878
                                                           1-Aug-10            1809.7                  5000               2.76                    STER           160        157        159     160           161                   162
                                                           1-Sep-10            1929.6                  5000               2.59                    SUNPHARMA      445        430        437     442           450                   455
                                                           1-Oct-10            1929.8                  5000               2.59                    SUZLON          46         44         45      46            47                    47
                                                           1-Nov-10            1988.3                  5000               2.51                    TATAMOTORS    1121       1105       1113    1123          1131                  1141
                                                           1-Dec-10            2081.5                  5000               2.40                    TATAPOWER     1230       1193       1211    1225          1243                  1257
                                                           1-Jan-11            2110.4                  5000               2.37                    TATASTEEL      601        592        597     601           606                   611
                                                           1-Feb-11            2005.4                  5000               2.49                    TCS           1071       1051       1061    1076          1086                  1101
                                                           1-Mar-11            2139.5                  5000               2.34                    UNITECH         36         35         36      37            37                    38
                                                                               Total                   60000              31.15                   WIPRO          434        423        429     437           442                   450
           34   MONEY MANTRA   1-15 April, 2011                                                                                                                                                      1-15 April, 2011   MONEY MANTRA   35
EP-20-37--_Alok.qxd     3/29/2011          2:00 PM           Page 18


                                   Markets to continue in
                                     positive direction
                               Kundli- 1 Apr 2011, Time: 9:00 AM, Place: Mumbai
                                            3                             12
                                     4                                  Jupiter
                                                         2        Venus
                                            7                          9
                                                                      Rahu                                 Pt. Jai Govind Shashtri
                                                                                                              www. astrogovind.com

                          Better                             Norma           Better                        Better      Norma         Better
                          day for                            l trade         day for                       buying      l trade       day for
                          intra-                             expect          intra-                        expect      expect        intra-
                          day                                ed. But         day                           ed in       ed.           day
                          and                                use             opera-                        all the     Trend         and
                          com-                               cau-            tors.     Profit    One       sec-        is posi-      com-
                          modity           High              tion.                     book-     sided     tors.       tive.         modity
                          traders.         volatility,                                 ing       move-                               traders.
                                           but bet-                                    expect-   ment
                                           ter buy-                                    ed in     expect-
                                           ing                                         after-    ed. Be
                                           expect-                                     noon.     cau-
                                           ed.                                                   tious.

                           1 Apr            4 Apr             5 Apr          6 Apr      7 Apr     8 Apr    11 Apr      13 Apr        15 Apr

           36   MONEY MANTRA   1-15 April, 2011
EP-38-49.qxd    3/29/2011      2:01 PM        Page 2

                                                                                                                                CMP Book Value MCap 52week Low                                   52week High
                Alok Dwivedi
                                                                                   RELIANCE COM.                                102.95 244.66  20743Cr 74.65                                    204.75

                    ifty was not able to hold above the psychological barrier of   Call charges have fallen, operational                                                    Reliance Communications had report-

          N         5400 on the last trading day of the week ended March 18,
                    but Indian markets outperformed most of the other mar-
                    kets - emerging and developed - during the week. India is
           relatively less exposed to Japan and that restricted the damage. On
           the other hand, economies which are more exposed to the country
                                                                                   costs have risen and margins have
                                                                                   declined. It has more debt than its mar-
                                                                                   ket capitalisation. Share price has
                                                                                   dipped nearly 80 per cent in the last
                                                                                   three years. This is the story of
                                                                                   Reliance Communications.
                                                                                                                                     The stock is under the
                                                                                                                                grip of speculators, that's
                                                                                                                                why we see huge volatility in
                                                                                                                                the stock after every bit of
                                                                                                                                                                            ed a nearly 40 per cent decline in con-
                                                                                                                                                                            solidated net profit at Rs.445 crore
                                                                                                                                                                            for the quarter ended September 30,
                                                                                                                                                                            2010. RCom's total income from oper-
                                                                                                                                                                            ations declined to Rs.5022.99 crore
                                                                                                                                                                            in the second quarter, from
           and also have significant investments from there got hit hard. But          Telecom sector has been negative-        news. It is better to avoid it at           Rs.5496.25 crore in the same quarter
           overall our markets have not performed well in the year 2011 so far     ly impacted by the regulatory uncer-         current prices as upside is                 previous year. Meanwhile, minutes of
           as Sensex and Nifty have lost 12.8 per cent and 12.4 per cent y-t-      tainties. TRAI has issued recommen-                                                      usage increased to 94.6 billion in the
                                                                                   dation with regard to re-pricing, re-        not visible in the stock. Only              July-September quarter of current fis-
           d respectively. Shares of bellwether companies got battered signif-     framing of spectrum and increase in                                                      cal against 84.5 billion in the same
           icantly. Surprisingly, a few big companies- like Reliance                                                            thing which can create
                                                                                   spectrum charge. Operators will have                                                     quarter last year. The customer base of
           Communications and Tata Communications- are trading below               to pay a large sum if the Department         upside is stake sale in the                 the company rose by 36.3 per cent to
           their lows made during recession. If we look at the shares of BSE-      of Telecommunications (DoT)                  company.                                    117 million in the September quarter
           500, more than 60 shares are trading below their book value. From       accepts the regulator's recommenda-                                                      against 86 million in the same quar-
           BSE- 100, there are five stocks-Reliance Communications, Housing        tions. This has come when investors                                                      ter last year.
           Development and Infrastructure (HDIL), Hindustan Petroleum              already had huge concerns on the                                                              Such bad performance continued
                                                                                   company's operational performance                                                        for the October- December 2010 quar-
           Corporation (HPCL), Tata Communications and Indiabulls Real             as well as huge debt on its balance                                                      ter as well. During the period,
           Estate- which are trading below their book value. These all have        sheet.                                                                                   Reliance Communications posted a
           lost 34 to 45 per cent during the last six months. Why these stocks         List of worries is not going to end                                                  56.6 per cent decline in net profit to
           are trading below their book value? Why these have performed so         easily. After completing investigation                                                   Rs.480 crore, compared to Rs.1108
           badly? What has gone wrong with the stocks? Have these become           into special audit of five leading oper-                                                 crore in the corresponding quarter pre-
           fundamentally weaker? Now comes the big question -- is it the right     ators,        including        Reliance                                                  vious year. Its revenues dipped by six
           time to buy them?                                                       Communications, the Telecom                                                              per cent to Rs.5004 crore, a fall of 2.2
                                                                                   Ministry is likely to raise demand of                                                    per cent q-o-q. RCom's margins for
                                                                                   over Rs.1,100 crore from them for                                   ARUN KEJRIWAL        the quarter stood at 33.3 per cent, com-
                                                                                   under reporting revenues. The                                          DIRECTOR, KRIS    pared to 34.1 per cent in the same
                                                                                   demand is likely to be raised by                                                         quarter last year. The total number of
                                                                                   March-end. In 2009, TRAI had asked          ried lower licence fee.                      minutes used in the third quarter stood
                                                                                   the DoT to conduct a special audit of           If we look at the numbers, last few      at 91.5 billion, down 3.3 per cent q-
                                                                                   the financial accounts of five telecom      quarters have not been good for the          o-q. EBITDA for RCom stood at

                                                                 HOPING AGAINST    companies (including RCom) for the
                                                                                   2007-08 period. TRAI had observed
                                                                                                                               company as the competition in the
                                                                                                                               telecom sector has squeezed its mar-
                                                                                                                                                                            Rs.1668 crore, which shows an eight
                                                                                                                                                                            per cent fall, in comparison to Rs.1812

                                                                                   that a few operators were reporting         gins. Amid high tariff war and stiff         crore in the third quarter of FY10.
                                                                                   more revenue in segment, which car-         competitions among the players,              However, company's customer base
                                                                                                                                                                            went up by 34 per cent y-o-y to 12.6
                                                                                                               REPORT    CARD (RETURNS)                                     crore from 94 crore in the same quar-
                                                                                   Company           1 month     3 month       6 month      9 month       1 year            ter last year. During October-
                                                                                   HPCL              -3.09%      -20.55%       -39.22%      -2.6%         2.46%             December 2010, the debt went up by
                                                                                   RCom              4.55%       -17.55%       -37.22%      -45.39%       -35.09%           Rs.3250 crore to Rs.32400 crore.
                                                                                   Tata Com          3.74%       -11.93%       -34.82%      -14.66%       -26.16%
                                                                                                                                                                                 Naitik Mody, Analyst at Angel
                                                                                                                                                                            Broking, says, "Apart from huge debt
                                                                                   HDIL              5.32%       -16.78%       -44.49%      -35.84%       -48.68%           and declining margins, there have
                                                                                   Indiabulls Real   -6.52%      -18.2%        -40.01%      -28.32%       -36.16%           been issues of corporate governance
                                                                                   Estate                                                                                   with the company." In February, Anil
                                                                                                                                                                            Ambani was questioned by CBI which
                                                                                                     SIMPLE MOVING AVERAGES            OF THE STOCKS
                                                                                                                                                                            is investigating telecom fraud. Shahid
                                                                                   Stock              CMP       30 days       50 days      150 days       200 days          Usman Balwa, the promotor of Swan
                                                                                                                SMA           SMA          SMA            SMA
                                                                                                                                                                            and Director of Etisalat DB, was
                                                                                   HPCL               331.05    332.77        345.71       432.59         430.29
                                                                                                                                                                            arrested and was confronted with Anil
                                                                                   RCom               104.50    98.04         111.37       143.41         153.49            Ambani during the investigation by
                                                                                   Tata Com           217.80    213.57        227.63       277.99         276.43            CBI. It was alleged that Etisalat was
                                                                                   HDIL               155.45    152.49        154.01       214.12         224.33            ineligible for 2G spectrum as ADAG
                                                                                   Indiabulls Real    107.45    111           115.93       154.04         155.89            had more than 10 per cent shares in
                                                                                   Estate                                                                                   Swan. However, Etisalat said that
                                                                                                                              (Based on Closing of March 18, 2011 on BSE)   Anil Ambani Group firm RCom had
           38   MONEY MANTRA   1-15 April, 2011                                                                                                                                      1-15 April, 2011   MONEY MANTRA   39
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                                                                                 Rcom : 1 Year performance                                                                     CMP           Book Value MCap                  52week Low          52week High
           less than 10 per cent share capital in
           Etisalat when it applied for 2G
                                                                                                                                                        HDIL                   159.65        205.04     6893Cr                122.50                309.25
           licences. As per the rules and regula-
           tion for the allotment, no company or                                                                                                            With higher cost of capital and ris-                                              feet. After the completion of the first
           firm can apply for licences bundled                                                                                                          ing interest rates, the outlook for real                                              phase, the developer would receive
           with start-up spectrum in which any                                                                                                          estate sector in general looks challeng-          All the concerns are now            65 acres in return. But Desai says,
           telecom operator has equity of more                                                                                                          ing. The struggle by property devel-         factored in the price of the             "Given the delay/uncertainty in shift-
           than 10 per cent.                                                                                                                            opers to repay the debt, taken in good                                                ing of families, we have
                Adding more to its woes, two con-                                                                                                       times, is still continuing. A number         scrip and it is likely to go up          excluded10mn sq ft (potential 65
           vertible bonds are due over the next 12                                                                                                      of big developers are selling land                                                    acres) (while calculating its valuation),
           months. A $297 million bond, matur-                                                                                                          parcels to meet repayment obligations        from current prices. The                 which HDIL is expected to get at the
           ing in May 2011, has a conversion price                                                                                                      for the financial year 2010-2011.            business model of HDIL is                airport vicinity as it rehabilitates
           of Rs.475. In addition, a $925 mil-                                                                                                          Talking specifically about HDIL,                                                      85,000 families. Overall, we expect
           lion bond maturing in March 2012 has                                                                                                         delays in execution, hike in FSI and         decent and we maintain Buy               the share of TDR sales in the revenue
           a conversion price of Rs.654. Looking                                                                                                        weak MMR property market outlook             on the scrip with a target of            mix to fall from 60 per cent in FY2011
           at the current price of Reliance                                                                                                             have resulted in the current situation                                                to 30 per cent in FY2012."
           Communications, investors are not                                                                                                            of the stock. Apart from these, the          Rs.243 for an investment                      If we look at the numbers, for
           likely to convert their holdings into                                                                                                        HDIL stock underperformed in the                                                      October- December 2010 quarter, rev-
           equity. Since the bonds are out of            RCOM: SHAREHOLDING               PATTERN          Price/Book Value of ~0.5x FY12E,             last cyclical downturn primarily due         horizon of 12 months.                    enue for HDIL increased 11.4 per cent
           money at current prices, Reliance                                            (in per cent)      which is lower when compared to its          to its overdependence on TDR                                                          y-o-y and 22.2 per cent q-o-q to Rs.455
           Communications is likely to have to                                                             peers Bharti & Idea which are trad-          (Transferable Development Right)                                                      crore on account of TDR sale of 1.25
                                                                      Dec 10    Sep 10       Jun 10
           shell out about $374 million for the                                                            ing above ~1.5x FY12E. Unicon                sales. Param Desai, Analyst (Logistics                                                million sq ft from the MIAL project
           bond maturing in May 2011 and $1.2           Promoter 67.86          67.72        67.72         Financial maintains Hold on the stock        & Real Estate), Angle Broking, says,                                                  and average realisation of Rs.3,100/sq
           billion for the bond maturing in             FII           8.44      8.42         8.01          with a target price of Rs.115.               "Overall scenario for realty sector has                                               ft (Rs.3,000/sq ft in 2QFY11). Further,
           March 2012.                                                                                     Madhumita Ghosh, Vice President -            been bad no doubt and this has been                                                   it received around Rs.65 crore from
                                                        DII           9.10      9.24         9.36
                Above         all,       Reliance                                                          PMS & Research, Unicon Financial,            a reason behind the underperformance                                                  sale of FSI in Vasai and Virar. EBIT-
           Communication has really no clear            Others        14.60     14.62        14.91         says, "The reduction of intensity in         of the Mumbai-based realtor HDIL.                                                     DAmargin came in at 58.5 per cent, up
           answer as to how it is going to deal                                                            the price war within telecom indus-          Issues related to corporate governance                                                by 1,236bp y-o-y (down 512bp q-o-q
           with its huge debts. All its efforts to      joint ventures and acquisitions. But               try and strong traffic would drive rev-      have been there for the company as                                                    on account of rising sand cost) owing
           collect money through equity have            it didn't come up with the IPO.                    enue going forward. We believe the           well. Delay in relocation project of                                                  to the lower costs associated with the
           not been fruitful so far. Last year,         Reliance Infratel had previously filed             stock at the current level provides          MAIL had been among significant                                                       FSI sale. Consequently, operating
           Reliance Communications had                  a regulatory application in February               decent upside." Salil Sharma, Partner,       reasons behind its setback."                                        PARAM DESAI       profit stood at Rs.267 crore, which is
           attempted to sell a 26 per cent stake        2008 for an IPO but shelved plans                  Kapur Sharma & Company, says, "It                HDIL had faced several delays in                        ANALYST, ANGEL BROKING    up 12.4 per cent q-o-q and 41.2 per
           in itself to pare debt. But it failed to     amid a global stock market crash.                  has been under immense pressure due          rehabilitating 1,000 families as part of                                              cent y-o-y. PAT for the company grew
           do so. In addition, it had entered into      However, it has succeeded in getting               to its leveraged position and the stock      the first phase of a relocation project     survey of slum dwellers and has inti-     54.8 per cent y-o-y and17.8 per cent q-
           a deal to merge its tower arm with a         a loan facility from CDB recently. It              has been beaten up drastically. As of        of Mumbai Airport International             mated them on the proposed reloca-        o-q to Rs.252cr.
           rival, but the deal collapsed. Not only      has signed the document for loan                   now, there are positive signs and it         Limited (MIAL). However, the com-           tion. But Ghosh says, "Eligibility sur-        The company has around Rs.4,000
           this, its plans to float an initial pub-     facility of Rs.87 billion ($1.93 billion)          may go to 130-135 levels in short            pany had to await clearances from the       veys conducted by local government        crore of debt on the books as of
           lic offering for its tower unit didn't       from China Development Bank to                     term."                                       Maharashtra          Housing       Area     agencies recently are unclear as slum     December 2010. It has to repay Rs.150
           take off. In January 2010, the com-          restructure 3G loans (Rs.60 billion)                    On the other hand, Angel Broking        Development Authority and other             dwellers seem to have illegally divid-    crore till March 2011. Between
           pany got the market regulator's nod for      and part of it would be utilised for               maintains neutral view on the stock.         government agencies to undertake the        ed the current units to make them-        November 2011 and March 2012, it
           the IPO of its telecoms tower unit           equipment purchase (Rs.27 billion).                Mody            says,          "Reliance     rehabilitation work. HDIL's deadline        selves eligible for more flats."          has to repay around Rs.350 crore. It
           Reliance        Infratel.     Reliance       According to the management, it                    Communication has a huge burden of           to shift the families was September             After the shifting, land will be      has raised Rs.1200 crore through qual-
           Communications had said it plans to          would save Rs.5 billion per year on                debt which is more than its market           2009. The project was first delayed by      cleared for the proposed Sahar            ified institutional placement (QIP),
           use proceeds from the 156 million            interest outgo from this loan facility.            capitalisation." K K Mital, Head,            a few months and then due to unavail-       Elevated Road, connecting the inter-      which is being used in various proj-
           shares IPO to cut debt, for expansion,           The company is trading at                      PMS, Globe Capital, says, "We are            ability of water connection, the shift-     national airport to western express       ects. Sharma says, "The stock is cur-
                                                                                                           seeing a short term bounce back in           ing had to be stopped. The Mumbai           highway. HDIL has officially sold         rently trading above its 20 days and
                                       RCOM: PEER COMPARISON                                               the stock, but it is better to avoid it      Metropolitan Region Development             transfer of development rights (TDR)      50 days simple moving averages. It has
           Company          Market Cap P/E (TTM) P/BV EV/EBIDTA ROE ROCE D/E                               if one wants to invest." Investors           Authority has already completed a           of approximately 11-12 million square     a good support near 130-140 levels.
                            (Rs. in Cr.) (x)     (TTM) (x)      (%) (%)  (x)                               have lost confidence in Reliance                                       HDIL: PEER COMPARISON                                       Investors, who are already invested,
                                                 (x)                                                       Communications and if analysts are                                                                                                 may hold it. But as the overall mar-
                                                                                                                                                        Company            Market Cap     P/E      P/BV    EV/EBI   ROE    ROCE D/E
                                                                                                           to be believed, the only thing that will                        (Rs. in Cr.)   (TTM)    (TTM)   DTA      (%)    (%)  (x)
                                                                                                                                                                                                                                              ket is looking murky, it is better to
           Bharti Airtel    122,109.26 15.25           3.32    8.25            29.3 28.5        0.20
                                                                                                           inspire confidence in the stock is infu-                                       (x)      (x)     (x)                                avoid weaker sectors like realty and
           Rel. Comm.       20,743.40        0.00      0.41    18.38           0.9     2.2      0.54       sion of funds. Arun Kejriwal, Director,      DLF                38,753.93      41.07    3.02    33.98    6.1    7.5    0.88        investors should avoid the scrip." But
                                                                                                           KRIS, says, "The stock is under the grip     JP Associates      17,894.08      24.19    2.18    11.50    13.5   11.1   2.13        Desai has other ideas as he says, "All
           Idea Cellular    20,097.78        23.61     1.76    8.48            9.0     9.2      0.62       of speculators, that's why we see huge       Unitech            9,968.10       16.89    1.13    21.17    9.9    9.0    1.15        these concerns are now factored in the
                                                                                                           volatility in the stock after every bit of   Oberoi Realty      8,031.79       61.42    4.19    0.00     2.1    3.1    0.01        price of the scrip and it is likely to go
           Tata Comm        6,053.40         22.54     0.83    9.31            4.5     3.2      0.35
                                                                                                           news. It is better to avoid it at current    Jaypee Infratec.   7,896.07       6.20     2.16    0.00     30.1   10.9   2.34        up from current prices. The business
           Tata Tele. Mah. 2,876.16          0.00      -4.32   14.94           0.0     0.0      0.00       prices as upside is not visible in the       HDIL               6,893.15       7.81     0.81    10.78    10.4   12.7   0.71        model of HDIL is decent and we main-
                                                                                                           stock. Only thing which can create           IRB Infra.Devl.    6,160.29       94.38    4.49    143.77   3.5    3.1    0.29        tain Buy on the scrip with a target of
                                                                                (Source: India Infoline)
                                                                                                           upside is stake sale in the company."        Indbull.RealEst.   4,589.67       77.00    0.72    74.54    0.3    1.3    0.14        Rs.243 for an investment horizon of
           40   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                         1-15 April, 2011   MONEY MANTRA   41
EP-38-49.qxd    3/29/2011       2:01 PM        Page 6

               HDIL: SHAREHOLDING           PATTERN                            HDIL: 1 Year performance                                       HPCL: Shareholding pattern                                         HPCL: 1 Year performance
                                   (in per cent)                                                                                                                          (in per cent)
                       Dec 10 Sep 10 Jun 10
                                                                                                                                                         Dec 10 Sep 10 Jun 10
           Promoter    38.56     38.56        42.26
                                                                                                                                              Promoter   51.11    51.11      51.11
           FII         39.28     37.18        28.18
           DII         0.52      1.09         1.01                                                                                            FII        8.26     8.73       6.54
           Others      21.64     23.17        28.55                                                                                           DII        27.72    27.86      29.35
           12 months." Ghosh says, "However,                                                                                                  Others     12.91    12.30      13
           EPS for HDIL is expected to grow by
           30 per cent to Rs.29.5/share for                                                                                                   of government-run oil marketing
           FY12E over FY11E. At the CMP of                                                                                                    companies are stressed. If rising
           Rs.160, stock trades at 5.8x on                                                                                                    prices force the government to
           EV/EBITDA basis and 5.4x its                                                                                                       review the subsidy policy, it would
           FY12E, we advise investors to avoid                                                                                                be good. But the government can
           the sector and look for other sectors.                                                                                             be extremely unpredictable."
           Investor with high risk appetite can                                                                                                   Government has reconstituted
           prefer HDIL over Indiabulls Real                                                                                                   a ministerial panel on fuel pricing,
           Estate from valuation perspective."                                                                                                but the grouping, headed by
                                                                                                                                              Finance Minister, is not likely to
                                                                                                                                              meet before Assembly elections in                                        HPCL: PEER COMPARISON
                                                        CMP Book Value MCap 52week Low                            52week High
           HPCL                                         338.70 341.30 11319Cr 293.25                              555.45
                                                                                                                                              five states are finished in May
                                                                                                                                              2011. Kejriwal says, "HPCL is in
                                                                                                                                                                                           Company      Market Cap
                                                                                                                                                                                                        (Rs. in Cr.)
                                                                                                                                                                                                                                          EV/EBID- ROE
                                                                                                                                                                                                                                          TA       (%)
                Finance Minister ignored the pro-                                                   approved the release of a cash com-       all sort of troubles due to govern-                                       (x)     (x)       (x)
           posal of a reduction in custom duty                                                      pensation of Rs.21000 crore for the       ment policies. It is expected to run
                                                                                                                                                                                           Reliance     333,114.50      16.98   2.59      12.12         13.4         11.9    0.56
           in the Union Budget 2011-12 to con-                Oil marketing                         three state-run fuel retailers.           with such huge losses till the
           tain the impact of a spurt in global                                                         If we look at numbers, these get      assembly elections are over.
           crude oil prices. Chief executives of          companies are not a good                  changed according to cash compensa-       Central government may increase              IOCL         75,181.47       8.26    1.49      6.10          21.6         17.0    0.95
           three oil marketing companies                  bet in the country looking                tion and prices of crude globally. Net    the prices after elections." As              BPCL         20,625.86       15.69   1.58      8.78          12.2         9.8     1.72
           (HPCL, IOC and BPCL) recently                                                            profit for Hindustan Petroleum            Diesel pricing is a hugely politi-
           gave a presentation to the Oil Ministry
                                                          at the uncertainty and                    Corporation in the July-September         cal sensitive decision, the ruling           Essar Oil    17,438.01       33.99   3.72      13.67         0.7          8.3     2.47
           on the quantum of losses they are suf-         sensitivity. We are not                   quarter was Rs.2089.61 crore as           combine doesn't want to take any             HPCL         11,318.71       9.65    0.98      7.59          11.7         9.1     1.98
           fering, but were not allowed to hike           positive on oil marketing                 against a net loss of Rs.136.68 crore     chances in the Assembly elections.
           prices despite crude ruling at a two-                                                    in the year-ago period. The com-          Rahaman says, "Prices of petrol              diesel deregulation looks difficult         to avoid HPCL." Kejriwal holds the
           year high of over $110 per barrel. The         companies at this                         pany's net sales increased to             and diesel are so much politically           considering that inflation still remains    same view as he says, "It is better to
           scrip of HPCL has performed badly on           juncture and one should                   Rs.30709.73 crore in the second           sensitive issue that government              high. We are negative on the stock and      avoid HPCL as of now." Rahaman
           the bourses. Ghosh says, "The HPCL                                                       quarter ended September 30, 2010,         may reverse the decision of petrol           advice investors to stay away from the      says, "Oil marketing companies are
           stock has corrected around 35 per cent         avoid HPCL at current                     from Rs.24456.15 crore in the             deregulation if crude goes $120-             stock. It is better to avoid the stock      not a good bet in the country looking
           in the last 6 months largely on the back       prices.                                   same quarter last fiscal. On the          130 a barrel."                               as of now." Sharma says, "Looking           at the uncertainty and sensitivity. We
           of a steep rise in crude oil prices. Brent                                               other hand, it had reported its net           Ghosh says, "We expect the risk          technically, it is trading below its 30-    are not positive on oil marketing com-
           crude futures price has increased near-                                                  profit at Rs.211.03 crore for the         premium on crude to remain for at            days, 50-days, 150-days and 200-days        panies at this juncture and one should
           ly 40 per cent to $113.2."                                                               third quarter ended December 31,          least a couple of quarters. Besides,         SMAs. At current levels, it is better       avoid HPCL at current prices."
                "The Company has to bear the bur-                                                   2010. The company had posted a
           den given the current situations.                                                        net profit of Rs 31.40 crore in the
                                                                                                                                                                                          CMP Book Value MCap    52week Low                                   52week High
           Government policy to deregulate
           petrol prices have boded well. But it
           is still making huge losses on Diesel
                                                                                                    October- December quarter
                                                                                                    last fiscal.
                                                                                                        If we recall, in June 2010, gov-
                                                                                                                                              TATA COM                                    210.65 255.47   6053Cr 192.65                                           354.30
           and LPG etc," says Sharma. Three                                                         ernment of India had granted                 Tata Communications (formerly             security services, all of which lever-      nificantly. The share has lost almost
           state OMCs- HPCL, IOC and BPCL-                                                          autonomy to oil firms- IOC, BPCL          VSNL) has recently announced the             age Tata Communications' global IP          35 per cent in the last six months and
           are together losing about Rs.285 crore                                                   and HPCL- to fix prices of petrol,        completion of its acquisition of             network. Tata Communications,               is trading below its book value."
           in revenue everyday on the sale of                                                       but decided to keep controls on           BitGravity, a content delivery network       across its global and pan-India net-             Besides, it has reached to this sit-
           diesel below its imported cost. If ana-                               K N RAHAMAN        diesel, LPG and kerosene to con-          (CDN). BitGravity will integrate as          work, offers managed solutions to           uation mainly due to excess compe-
           lysts are to be believed, this is the             DEPUTY RESEARCH HEAD, WAY2WEALTH       trol inflation and protect the poor-      a Tata Communications operating              multi-national enterprises, service         tition, decline in operating margin and
           biggest loss they have ever incurred.                                                    est. Due to this loss on these prod-      business subsidiary. They will operate       providers and Indian consumers.             EBITDA margin. Mital says, "Cost
           Besides diesel, IOC, BPCL and HPCL            Nair, Analyst (Oil & Gas), Angle           ucts, the three companies are pro-        from San Francisco in conjunction            Acquisitions have played a great role       of funding has increased for the com-
           are losing Rs.24.74 per litre on              Broking, says, "Uncertain scenario         jected to lose Rs.77645 crore in          with Tata Communications' global             in such position of the company, but        pany, but this cost has not been man-
           kerosene and Rs.297.80 per LPG                of cash compensation from govern-          revenues at current prices for the        CDN team. The acquisition comple-            if experts are to be believed, purchas-     aged due to consistent decline in mar-
           cylinder (14.2 kg). If we take all these      ment side makes it difficult for all oil   full fiscal. K N Rahaman, Deputy          ments Tata Communications' global            es for the company have been dearer         gins." Tata Communications had post-
           together, the three firms are losing          marketing companies. Sometimes             Research       Head       -     Equity,   media and enterprise strategy. It will       more than often. Sharma says,               ed a consolidated loss of Rs.197.41
           cumulative Rs.432 crore in revenue            these are compensated adequately,          Commodity             &         Forex,    add enhanced CDN and streaming               "Acquisitions           for        Tata     crore for the quarter ended December
           every day on selling diesel, domestic         sometimes not." For the first nine         Way2Wealth, says, "Since the sub-         capabilities to its growing line-up of       Communications were expensive and           31, 2010, against a net profit of
           LPG and kerosene below cost. Vinay            months, the Finance Ministry has           sidies are insufficient, the finances     value-added hosting, storage, and            have affected its balance sheet sig-        Rs.30.18 crore during the same peri-
           42    MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                  1-15 April, 2011   MONEY MANTRA   43
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                                                                     BSE 500 Companies trading below book value                                                                                                Tata Com: 1 Year performance
                Acquisitions for Tata                  Company          Closing     Book    Diff of BV  52 Week Low            52 Week High           We remain concerned
                                                                        Price      value    & Price
           Communications were                         Dredging Corpn. 327.45      474.65   -147.20 325.00 (25/02/2011)    665.50 (22/03/2010)   about pricing pressure in the
           expensive and have affected                 Bharati Shipyard 146.10     292.42   -146.32 129.30 (10/2/2011)     302.75 (27/04/2010)
                                                       Rel. Comm.       102.95     244.66   -141.71 74.65 (7/3/2011)       204.75 (28/06/2010)
                                                                                                                                                 voice business, slower growth
           its balance sheet                           Kesoram Inds.    198.40     336.00   -137.60 175.00 (10/2/2011)     418.60 (9/4/2010)     in service provider data, a
                                                       Videocon Inds.   184.70     312.33   -127.63 180.30 (21/02/2011)    294.50 (6/10/2010)
           significantly. The share has                MTNL             45.15      149.97   -104.82 38.00 (25/02/2011)     78.20 (7/4/2010)
                                                                                                                                                 delayed turnaround in
           lost almost 35 per cent in the              GE Shipping Co 259.25       352.71   -93.46 242.50 (24/02/2011      393.00 (10/11/2010)   Neotel's profitability and a
                                                       PSL              69.60      156.86   -87.26 64.50 (10/2/2011)       155.90 (27/04/2010)
           last six months and is trading              Guj Alkalies     116.45     189.42   -72.97 106.15 (21/05/2010)     146.50 (26/10/2010)   stretched balance sheet.
           below its book value.                       Bartronics India 58.40      129.97   -71.57 56.60 (25/02/2011)      164.10 (13/04/2010)   However, we have a Hold
                                                       IVRCL Assets     54.95      123.75   -68.80 45.00 (9/2/2011)        142.80 (21/06/2010)
                                                       Bajaj Hindusthan 68.40      136.68   -68.28 65.65 (25/02/2011)      150.90 (16/03/2010)   rating on the stock.
                                                       Lakshmi Energy 41.85        110.00   -68.15 39.30 (9/2/2011)        140.90 (15/04/2010)
                                                       Ansal Properties 36.25      96.68    -60.43 32.55 (10/2/2011)       97.70 (15/10/2010)
                                                       Moser Baer (I)   40.90      100.54   -59.64 37.35 (11/2/2011)       80.00 (17/03/2010)
                                                       Amtek Auto       122.05     180.64   -58.59 106.00 (10/2/2011)      200.85 (12/4/2010)
                                                       Allied Digital   80.85      136.36   -55.51 71.00 (11/2/2011)       270.60 (27/04/2010)
                                                       Amtek India      76.00      127.40   -51.40 50.40 (26/11/2010)      88.60 (25/01/2011)                                              TATA COM: SHAREHOLDING PATTERN
                                                       Patel Engg.      136.00     184.23   -48.23 133.80 (15/03/2011)     500.00 (27/04/2010)                                                                           (in per cent)
                                                                                                                                                                                                                                         gic investments in operators in South
                                                       Indbull.RealEst. 111.75     159.46   -47.71 99.25 (25/02/2011)      218.50 (10/11/2010)                                                                                           Africa (Neotel), Sri Lanka (Tata
                                                       JK Tyre & Indust 96.10      142.74   -46.64 75.50 (11/2/2011)       235.70 (29/03/2010)                                                        Dec 10     Sep 10     Jun 10       Communications Lanka Limited)
                                                       HDIL             159.65     205.04   -45.39 122.50 (10/2/2011)      309.25 (17/03/2010)                                                                                           and Nepal (United Telecom Limited).
                                                       Tata Comm        210.65     255.47   -44.82 192.65 (10/2/2011)      354.30 (2/9/2010)                                               Promoter 76.15        76.15      76.15        "But despite all this, its business
                                                       Punj Lloyd       62.95      107.57   -44.62 58.50 (25/02/2011)      188.90 (29/03/2010)                                             FII        1.19       1.10       0.98         model has not been able to attract the
                                                       Marg             104.35     148.42   -44.07 100.10 (28/02/2011)     243.80 (8/9/2010)                                                                                             attention of investors and it has been
                                                       Great Offshore   235.15     276.53   -41.38 220.00 (24/02/2011)     482.00 (30/04/2010)                                             DII        12.28      12.52      11.88
                                                                                                                                                                                                                                         an underperformer for such a long
                                    SALIL SHARMA       GNFC             92.70      133.77   -41.07 91.30 (15/03/2011)      146.20 (12/11/2010)                    MADHUMITA GHOSH          Others     10.38      10.23      10.99        time now," says Sharma. If analysts
                    PARTNER, KAPUR SHARMA & CO.        SCI              108.25     148.77   -40.52 98.25 (25/02/2011)      202.50 (6/10/2010)         VP-PMS & RESEARCH, UNICON FIN.                                                     are to be believed, weaker competi-
                                                       Anant Raj Inds.  77.40      117.07   -39.67 66.15 (21/02/2011)      160.00 (11/10/2010)                                                   TATA COMMUNICATIONS                     tive      positioning       of     Tata
                                                       JK Lakshmi Cem.    45.10    80.91    -35.81   40.50 (11/2/2011)     79.90 (22/04/2010)
           od last fiscal. Consolidated revenue                                                                                                  aggressive as far as acquisitions are             (FORMERLY VSNL):                      Communications in the Indian tele-
                                                       U B Holdings       182.70   218.27   -35.57   173.50 (25/02/2011)   345.60 (2/9/2010)
           during the reported quarter stood at                                                                                                  concerned. Some of the existing debt                 ACQUISITIONS                       com space has been a reason of worry
                                                       ICSA (India)       118.80   149.04   -30.24   112.20 (31/01/2011)   162.00 (12/11/2010)
           Rs.3018 crore from Rs.2770.91 crore,        CPCL               203.90   232.44   -28.54   184.00 (25/02/2011)   299.30 (31/03/2010)
                                                                                                                                                 had been taken when the company           BT Group's (BT) UK         January 2010       for investors. In addition, Tata is not
           up 8.91 per cent. Global voice solu-        Orbit Corpn.       49.25    77.40    -28.15   44.90 (25/02/2011)    172.50 (16/04/2010)   went on a hunt for overseas acquisi-      Mosaic business                               coming with a blue print to merge
           tions contributed Rs.1623.99 crore,         Essar Shipping     88.05    115.65   -27.60   67.10 (29/03/2010)    136.25 (9/8/2010)     tions. It had bought Tyco Global                                                        Telecom operations is a cause of con-
           while global data and managed serv-         Varun Ship. Co.    26.80    54.13    -27.33   25.35 (10/2/2011)     54.95 (7/4/2010)      Network for $130 million in 2005 and      Neotel             South January 2009         cern.
           ices vertical accounted for Rs.1187.71      Sasken Comm.Tec.   150.85   178.03   -27.18   149.50 (8/3/2011)     237.00 (20/10/2010)   Teleglobe for about $239 million in                          Africa                         Mital says, "Profitability from
           crore for the third quarter ended           Gitanjali Gems     214.30   239.32   -25.02   94.00 (27/05/2010)    395.00 (12/11/2010)   2006 (See the complete list in adja-                                                    value added services may do the trick
           December 31, 2010.                          J K Cements        130.85   155.66   -24.81   110.15 (11/2/2011)    199.90 (25/10/2010)   cent       table).     The        Tata    China           China June 2008               for the company as well as the sec-
                As the company has been depend-        Escorts            134.50   158.75   -24.25   94.10 (10/2/2011)     245.95 (11/11/2010)   Communications Global Network             Enterprise                                    tor, but it is better to avoid it as of
           ent on borrowings too much, inter-          JSL Stain.         79.35    103.28   -23.93   78.10 (15/03/2011)    135.50 (28/09/2010)   includes one of the most advanced         Communication                                 now." Sharma says, "Looking techni-
                                                       India Cements      91.50    114.86   -23.36   81.00 (9/2/2011)      143.15(12/4/2010)                                               s Limited (CEC)
           est cost in the July-September quarter                                                                                                and largest submarine cable net-                                                        cally, Tata Communications contin-
                                                       Prakash Inds.      76.00    98.89    -22.89   70.65 (25/02/2011)    243.95 (6/4/2010)
           at Rs.140 crore was almost 5 per cent       Provogue (India)   39.70    61.44    -21.74   32.50 (10/2/2011)     83.40 (7/10/2010)
                                                                                                                                                 works, a Tier-1 IP network, with con-                                                   ues to remain in downtrend.
           of its sales and represented an annu-       Karnataka Bank     102.05   121.69   -19.64   96.83 (10/2/2011)     192.97 (10/11/2010)   nectivity to more than 200 countries                                                    However, it is trading above its 30
           alised cost of around 7.70 per cent                                                                                                   across 400 PoPs, and nearly 1 million     Transtel           South April 2007           days SMA, but is still below its 50
                                                       Parsvnath Devl.    37.75    57.15    -19.40   25.10 (11/2/2011)     74.73 (29/09/2010)
           on the company's outstanding debt                                                                                                     square feet of data center and collo-     Telecoms (TT)      Africa                     days, 150 days and 200 days SMAs.
                                                       Electrost.Cast.    30.40    48.46    -18.06   29.00 (24/02/2011)    56.15 (12/4/2010)
           as of March 31, 2010. It was also a         Gammon India       111.05   128.85   -17.80   100.30 (10/2/2011)    241.90 (6/4/2010)     cation space worldwide.                                                                 Hence, it is better to avoid Tata
           major factor for the company's huge         Mastek             123.60   140.34   -16.74   122.25 (15/03/2011)   379.00 (9/4/2010)         VSNL was given a 10-year              Tata Power         India   September          Communications as of now." But
           quarterly net loss, wider than a year       D B Realty         112.65   127.31   -14.66   100.00 (7/3/2011)     540.10 (31/03/2010)   monopoly, starting April 1, 1994, on      Broadband                  2005               Ghosh has other ideas. She says, "We
           earlier. Tata Communications had            Alok Inds.         21.00    34.48    -13.48   17.75 (25/05/2010)    35.00 (11/11/2010)    international calls. However, to bring                                                  remain concerned about pricing pres-
           posted consolidated loss of Rs.213.5        Subex              50.70    63.83    -13.13   45.85 (25/05/2010     94.90 (12/11/2010)    in competition and make call rates        Teleglobe          US      July 2005          sure in the voice business, slower
                                                       3i Infotech        41.85    50.81    -8.96    38.15 (10/2/2011)     82.50 (16/03/2010)                                              International
           crore for the quarter ended September       Mercator Lines     37.45    45.03    -7.58    33.65 (10/2/2011)     76.90 (11/11/2010)
                                                                                                                                                 more affordable, the BJP-led govern-                                                    growth in service provider data, a
           30, 2010 as compared to net loss of                                                                                                   ment announced a new telecom pol-                                                       delayed turnaround in Neotel's prof-
                                                       Vardhman Textile 253.05 260.15 -7.10          221.10 (16/03/2010) 376.70 (26/10/2010)
           Rs.155.54 crore for the quarter ended                                                                                                 icy in 1999 which called for terminat-    Tyco Global        US      November           itability and a stretched balance sheet.
           September 30, 2009. However, total          Firstsour.Solu.    16.65    23.02 -6.37       15.50 (9/2/2011)      36.70 (9/4/2010)      ing VSNL's monopoly in 2002. But          Network                    2004               With the company's land bank val-
           income had increased 9.21 per cent          B.L.Kashyap        19.65    25.14 -5.49       19.00 (15/03/2011)    50.00 (29/09/2010)    those days are gone now. Tata                                                           ued at Rs.135 per share, Tata
           from Rs.2757.54 crore for the quar-         Geodesic           81.25    85.41 -4.16       67.25 (10/2/2011)     142.75 (10/11/2010)   Communications' depth and breadth         Dishnet DSL's      India   March 2004         Teleservices stake valued at Rs.75 per
           ter ended September 30, 2009 to             HPCL               338.70 341.30 -2.60        293.25 (29/04/2010) 555.45 (15/09/2010)     of reach in emerging markets              ISP division                                  share and core business valued at
           Rs.3011.5 crore for the quarter ended       CESC               303.70 305.94 -2.24        263.30 (10/2/2011)    432.85 (14/09/2010)   includes leadership in Indian enter-                                                    Rs.18 per share; the company is val-
           September 30, 2010. As discussed            K S Oils           32.15    33.77 -1.62       28.55 (9/12/2010)     71.75 (20/04/2010)    prise data services, leadership in        Gemplex            US      July 2003          ued at Rs.228. We have a Hold rat-
           earlier, the company has been very          Sh.Ashtavinayak    5.86     6.14     -0.28    4.86 (14/01/2011)     51.20 (5/11/2010)     global international voice, and strate-                                                 ing on the stock."
           44   MONEY MANTRA   1-15 April, 2011             (Based on Closing of March 16 on BSE)                                                                                                                                                 1-15 April, 2011   MONEY MANTRA   45
                                                            (Source: SMC Global)
EP-38-49.qxd    3/29/2011      2:01 PM        Page 40

                                                        CMP Book Value MCap         52week Low   52week High
           INDIABULLS REAL                              111.75 159.46      4590Cr 99.25         218.50
                                                                                                                                                                                                              Stay Ahead by Asking
                 INDIABULLS REAL ESTATE                            India Bulls: 1 Year performance
                  SHAREHOLDING PATTERN

                    Dec 10
           Promoter 22.99       22.99
                                      (in per cent)
                                Sep 10 Jun 10
                                                                                                                                           Right Questions To Customers
           FII      55.06       61.96     59.15                                                                                                                                                                                   Each order is a unique order for Dell.
           DII      2.25        2.41      3.37
                                                                                                                                                                                        Understanding the need                    It is amazing how it manages it.
                                                                                                                                                                                        of customers is the key to

           Others 19.70         12.64     15.38                                                                                                                                                                                        An excellent example of customer
                                                                                                                                                                                                                                  driven thinking is the launch of T20
                Scenario for the real estate sector
                                                                                                                                                                                        growth. Any start up                      matches. In the world of 2 minutes
           has not been good for a very long time                                                                                                                                       company should ask                        noodle, five days cricket is simply
           now. Developers have been really                                                                                                                                                                                       out of place and out of time. Some
           struggling to sell their projects across                                                                                                                                     simple questions about                    people still sing the glorious cricket of
           the country. While the demand for res-                                                                                                                                       customer preferences                      past, even I lament. I lament the dis-
           idential property is relatively better,                                                                                                                                                                                appearance of five-day tests but I
           the commercial segment could take                                                                                                                                            and pain points and come                  patronise its shorter version - T20. As
           time to recover due to oversupply                                                                                                                                            up with an effective                      long as Cricket was run by cricketers,
           issues. Rising interest rates have                                                                                                  G Ramesh                                                                           the maximum (or minimum) the
           become another hurdle for realty play-                                                                                                                                       product. The best                         Association could come up with was
           ers that have high debt and are con-                                                     If we look a back, the company                he Book on Balanced Score             starting point for any new                one day matches. Then came the day
           strained by interest payments. The
           higher interest costs have resulted in
           decreased profit margins for devel-
                                                            Stock prices are
                                                        likely to move up if there
                                                        is an improvement in
                                                                                                had posted a net profit after tax of Rs.
                                                                                                31.45 crore for the quarter ended
                                                                                                September 30, 2010 as compared to
                                                                                                                                           T      Card written by Kaplan from
                                                                                                                                                  Harvard Business School and
                                                                                                                                           Norton is one of the most influential
                                                                                                                                                                                        products is to start with
                                                                                                                                                                                        the pain points of existing
                                                                                                                                                                                                                                  and night matches. But, once the game
                                                                                                                                                                                                                                  got into the hands of non players, they
                                                                                                                                                                                                                                  started thinking in terms of making
           opers, as well as a slight increase in                                               Rs. 5.96 crore for the quarter ended       books on performance management in                                                     it a consumer driven (read market
           final product pricing. Given the RBI's       cash flows and                          September 30, 2009. Total Income           recent times. It is rated to be one of the   offerings in the market.                  driven) game. They came up with T20
           focus on containing inflation, it is very                                            had improved from Rs. 32.26 crore          most popular books on management             Asking right questions is                 which suits the Boards, players and
           unlikely that interest rates would start     execution. Or else, no                  for the quarter ended September 30,        published by Harvard Business                                                          more importantly the advertisers. The
           going southwards. These higher rates         matter where the                        2009 to Rs. 65.62 crore for the quar-      School. The authors say a firm should        as important as finding                   spectators also lapped it up. This is one
           are posing difficulty for buyers as                                                  ter ended September 30, 2010.              follow a portfolio of perspectives and       right solutions.                          strategy which fitted everybody's
           well.                                        property prices move,                   Ghosh says, "EPS is expected to            metrics for measuring performance                                                      preferences.
                The scrip of Indiabulls Real Estate     stock prices will remain                grow by 60 per cent to Rs.8.2/share        and one of the perspectives they dis-                                                       All this come from asking what
           has not been able to perform and has                                                 for FY12E over FY11E. At the CMP           cuss is Customer Perspective. In the         kept priding themselves in scale and      the customers want than what you can
           dipped over 40 per cent in the last six      isolated without any co-                of Rs.111, stock trades at 16x on          context of customer perspective they         complexity. SAP had big four consult-     manufacture for the customers.
           months. Rahaman says, "It has not            relation.                               EV/EBITDA basis and 13.5x on               say a firm should pose the question:         ing firms backing it. Tally came with     Drucker calls this strategy as bring-
           been able to do better for various rea-                                              FY12E. Key risks to stock perform-         How should I look to my customers or         a simple and small scale version and      ing "value" to the customer than pro-
           sons. First reason has been overall                                                  ance would be lower FSI in                 who am I to you? They asked this             flooded the market. Even now we           ducing what is "product" to the man-
           dampening situation of the sector                                                    Mumbai's Worli project and low vol-        question much before Salman Khan             probably use 25% of the features of       ufacturer. Many repositioning hap-
           itself. Secondly, it has been involved                                               umes/softening of property prices in       asked. This is an interesting way of         Excel and many may not even know          pens from what Drucker calls as 'adap-
           in various controversies. The compa-                                                 Mumbai may impact its South                framing a strategic question. One of         its full version. These are expert sys-   tation to the customer's social and eco-
           ny had bought land from several mills                                                Mumbai project. We advise investors        my marketing professors used to say,         tems developed for experts. Then a        nomic reality'. He says the ultimate
           and a few court cases are pending                                                    to avoid the sector and look for other     if you don't position yourself proper-       startup company asks simple ques-         purpose of business is to 'create a cus-
           on payment issues." The two mills                                                    sectors. Investors with high risk          ly, customers will position you. That        tions about customer preferences and      tomer'. No one can beat Drucker in
           that it had taken in Central Mumbai,                                                 appetite can prefer HDIL over              is how heroes end up as comedians.           pain points and comes up with an          bringing fresh perspective to business
           it may cause some problem going                                                      Indiabulls Real Estate from valuation      Asking right questions is as impor-          effective product. The best starting      management. His book on Innovation
           forward. Investors have not been able                                                perspective." Mital says, "Stock           tant as finding right solutions.             point for any new products is to start    and Entrepreneurship is a must read
           to show confidence in the scrip as any                                K K MITAL      prices are likely to move up if there                                                   with the pain points of existing offer-   for entrepreneurs.
           penalty in these cases would affect its                                              is an improvement in cash flows and        Positioning and                              ings in the market. There are cheaper
                                                                    HEAD, PMS, GLOBE CAPITAL                                               Repositioning                                                                          Taste Differ
           profitability. Due to bad scenario for                                               execution. Or else, no matter where                                                     and modular versions in furniture,
           realty sector, there is a question mark      standalone basis, Indiabulls Real       the property prices move, stock                Positioning and repositioning            kitchen furnishing, etc. Why kitchen,           We all accept the fact that tastes
           on the profitability for upcoming            Estate registered a growth of 4 times   prices will remain isolated without        keep constantly happening in the mar-        even cooking today is modular, scal-      differ. So, how do we provide for this?
           quarter.                                     in net profit to Rs.19.53 crore for     any co-relation. Investors can't           ket. All products start somewhere and        able, and customisable. Somebody          We follow the strategy of providing
                Rahaman says, "It is one of the         quarter ended December 2010 as          expect anything from the scrip in the      get tweaked along the way.                   will do this one day in total housing.    a 'Thali Offer' so that the customer will
           best players of the sector as it is debt     against Rs.4.87 crore for the quar-     short term, but they can buy it at these   Automobile manufacturers kept                Customers will assemble for them-         take what he likes from among the
           free, which is very unlikely looking         ter ended December 31, 2009. Total      levels if they have an approach of         adding features to their cars until Nano     selves the product features according     offerings or a Buffet System where
           at its peers. It has a good land bank        income on standalone basis surged       2-3 years." But Rahaman says, "It is       came with a plain vanilla version.           to their need and choice. Dell has        he leaves out what he doesn't want.
           and running prestigious projects. But        2.35 times to Rs.54.96 crore for the    not bad to take a call in favour of        Tally software package is one of the         achieved it long back. For Dell all       It is economical. In the first case, there
           numbers look bad as they have not            three    month       period    ended    Indiabulls      Real      Estate      in   most successfully launched products          orders are placed through net and the     is a huge wastage and in the second
           been able to sell the projects." On          December 2010.                          comparison to HPCL."                       out of India. The enterprises softwares      customers configure their products.       one there is appetite killing routine-
           46   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                             1-15 April, 2011   MONEY MANTRA   47
EP-38-49.qxd    3/29/2011      2:01 PM        Page 42

           ness. Both happen because the                restaurant industry. The lesson is about     prospective buyer can try any of the
           provider doesn't know the preferences        how you would organizse your busi-           cuts and leave their measurement.
           of customers. Have you ever thought          ness to cater to the preferences of dif-     They can select the cloth and place
           about how a diet department functions        ferent customers. This is about how          order for the jean which will be home
           in a hospital? Once, when I was study-       you ensure Mass Customisation. The           delivered for which they will be
           ing a hospital, I ended up provoking its     classic example is of Levi's jeans           charged extra. Levi's cut down its
           dietician by making a stray remark by        which solved the problem of fit with         retailing cost, and the customers got
           saying after all a diet department is like   ladies jeans.                                their perfect fit, and they didn't mind
           a restaurant in a hotel. She got quite           You walk into any branded retain         paying more by way of courier
           furious and went about lecturing the         garment shop. You will find that it has      charges. The share of sales through this
           complexity of their operations. She          limited range of designs within a range      channel increased tremendously and
           explained how they cook for each and         of measurements. Take jeans, for             so also customer satisfaction.
           every patient individually as the            example. You will find one boot bot-
           patients are sensitive to diets in a hos-    tom or narrow or regular fit in five         Barriers to Trying
           pital. These are calibrated for calo-        sizes and three colours. In fact, an ordi-       This strategy was open to other
           ries, sugar and BP levels just for the       nary garment shop in Dadar station           jeans manufacturers and also to Levi's
           starters. There can be other compli-         road or station road in Ahmadabad or         earlier. Why didn't they go for it ear-
           cations. Even rice is not served the         in Ajmal Khan road in Karol Bagh will        lier? Drucker has an interesting expla-
           same way to the patients. For some,          have more range than these branded           nation in his book referred above. He
           it is brown, some it is smashed, and         shops. How do they manage to con-            says, "the strategies work, not because
           others it is whole. Diet department in       vince customers and why branded              they are clever, but because most sup-
           a hospital is truly a customer driven        shops avoid range? Ever wondered             pliers - of goods as well as of servic-
           and highly customised service which          why? You should analyse all these.           es, businesses as well as public - serv-
           I cannot think of in any other organi-       Levi's in US found that even after all       ice - institutions - do not think. They
           sations. No wonder the dietician felt        their designs and models, a signifi-         work precisely because they are so
           hurt when her department was com-            cant percentage of their women buy-          'obvious'. Why, then, are they so rare?
           pared to a restaurant in a hotel. Once       ers are not satisfied with their jeans.      For, as these examples show, anyone
           I got a bone in my plate in a five star      The dissatisfaction pertained mostly to      who asks the question, what does the
           hotel even after mentioning them that        the problem of fit. Levi's came out with     customer really buy? will win the
           I was a strict vegetarian. This could        an alternative marketing channel, apart      race". As we get trained more and
           have happened only because gravy is          from its existing retail channels of own     more we tend to ignore the obvious
           the same.                                    and franchised ones. It set up kiosks        more and more.
                These analogies have to be under-       in some of its outlet and kept some
           stood figuratively. This is not just for     samples of jeans and clothes. A                      (The author is Associate Professor
                                                                                                                          with IIM, Bangalore)
           48   MONEY MANTRA   1-15 April, 2011
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                                                                 AN OFFER WHICH OPENS                                                                                                                                                WHAT TO MIND FOR
                                                                                                                                                                                                                                            OPEN OFFER

           DOORS TO WEALTH
                                                                                                                                                                                                                                       Keep an eye on news relating to
                                                                                                                                                                                                                                                  probable takeovers.

                                                                                                                                                                                                                                     Keep an eye on financial health of

                Harish Kumar
                                                           age of share. When an open offer is
                                                           made by the promoter company, it is
                                                                                                     For any delay, the acquirer is required
                                                                                                     to pay interest on the amount.
                                                                                                                                                                        OPEN OFFERS                                                company, if it is in need to sell off its

                                                                                                                                                                                                                                            Keep an eye on activities of
                                                           known as 'Buy Back'. According to
                     hose who are dealing in share         Sultania, an open offer may also come     Offer price in open offer                                                                                                     Keep an eye on companies looking

           T         market must have heard
                     about open offer. It is said
                     that those who are well
           versed with playing the open offer
           cards make good money within a very
                                                           from       the      promoter
                                                           management/key personnel) itself.

                                                           or holding in the company. On the
                                                           other hand, a non-promoter comes

                                                           They do it to strengthen their stake
                                                                                                         In an open offer, price is fixed
                                                                                                     based on the average price for the last
                                                                                                     the 26 weeks. Usually, the price is
                                                                                                     higher than the prevailing market
                                                                                                     price, which is a motivation to current
                                                                                                                                                                                                                                      for an inorganic growth and also
                                                                                                                                                                                                                                   watch out for their expansion plans.

                                                                                                                                                                                                                                       What does it means?
           short span of time. Some people also            with an open offer with a view to         shareholders to sell their shares. But                                                                                             An open offer is an offer price
           consider its potential at par with the          acquiring the company. Most often a       technically, it is quite possible that the                                                                                       made to the shareholders of any
                                                                                                                                                                                                                                     company, with a view to acquiring
           IPO listing gains. There are many such          rival company uses this for a hostile     open offer's price may be less than the                                                                                                               their stake.
           players in share market who just deal           takeover. According to Sultania,          current price. This was seen with the
           in open offers and make quick bucks.            "Today there are various investors        open offer of JSW for Ispat. The open                                                                                                In open offer shares may be
           But making this profit calls for an             who are making profits just by putting    offer price was nearly 13 per cent                                                                                            brought by the company (promoter)
           extra effort.                                   money in companies for which an           lower than the announcement day's                                                                                                  hence there is a cash outflow,
                                                           open offer is likely to come."            closing price of Rs 23.60 on the                                                                                                 unlike that in IPO or Right Issue
           What is an open offer?                                                                                                                                                                                                             where there is an inflow.
                                                                                                     Bombay Stock Exchange. One should
                In an open offer a price is offered        Open offer and takeover                   note that the option of open offer is                                                                                                     In an open offer, price is
           to the shareholders of a company with               With lots and lots of corporate       only available to shareholders who                                                                                               fixed based on the average price
           a view to acquiring their stake. This           predators emerging these days, the        held shares on the record date of the                                                                                                        for the last 26 weeks.
           kind of offer can come from a promot-           chance of making quick returns for        open offer of the stock. During the
                                                                                                                                                                                                                                               Whosoever buys shares
           er (of a company) or from a non- pro-           the common shareholders has also          record date period, a new investor                                                                                                 in an open offer does not trade
           moter as well. Usually, a non-promot-           increased. According to current           cannot potentially buy the stock at the                                                                                             them in the secondary market.
           er makes an open offer in order to              SEBI's guidelines, when the acquir-       market rate and sell it back to the firm
           acquiring the company whereas a pro-            ing company increases its stake to 5      which has made the open offer.                                                                                                           Open offer decreases the
           moter does it to avoid the same.                per cent or 10 per cent or 14 per cent,   Someone who held shares before the                                                                                                holding of general shareholders.
                Generally, over a period of time,          it needs to disclose its holdings at      open offer was made and did not wish
           the price of any share reaches a certain        every stage to the target company and     to sell them back at the open offer
           higher level. But with an open offer,           also to respective stock exchanges.       price, could also make profit when-
           this price level can come in a single           But once the total holding reaches 15     ever the prices reaches his target
           day and with a single announcement.             per cent (known as trigger limit) the     level.
           An open offer is nothing but the exit           acquirer has to come out with an open                                                  2010, Swedish-Swiss engineering          4) Because of SEBI's directions:        8, 2010, SEBI, cleared both the open
           route, which is given to the existing           offer for existing shareholders. As per   Situations for open offer                    group ABB witnessed a single day         During the last week of December        offers i.e. of Inox and of Reliance
           shareholders by the acquirer of shares          rule, an acquirer is required to make     1) To follow takeover norms:                 jump of 23.44 per cent. This hap-        2010, market regulator SEBI found       Media Works for acquiring Fame
           through a public announcement. An               an open offer for at least 20 per cent    According to SEBI's guidelines, any          pened, after the company's parent        that the chairman of Pyramid            India. The takeover battle for Fame
           open offer can take place if any of the         additional shares once its holding        company buying more than 15 per              (i.e. promoter) announced an open        Saimira Theatre was involve in          (between the two) began in February
           promoters or non-promoters (who                 reaches 15 per cent.                      cent in another firm will have to            offer to buy additional 4.85 crore       fudging the company's accounts,         2010, when RMW launched a hos-
           have acquired more than 15 percent)                                                       make an offer to buy 20 per cent addi-       shares, or 22.89 per cent stake in the   misleading investors, making false      tile bid for a 62.08 per cent stake at
           of a company wants to increase their            Requirements for open offer               tional stake. To follow this norm,           firm at Rs 900 per share. The            corporate announcements and also        Rs 83.40 a share, 63.5 per cent high-
           stake or if the company is going to                 For making an open offer, an          JSW Steel came up with an open               offered price was at 33.62 per cent      for making a preferential allotment     er than Inox's open offer of Rs 51.
           delist from the stock exchange.                 acquirer is required to make a public     offer price of Rs 20.54 a share (for         premium over the previous day's          to himself without any inflow of        RMW accused Fame of rejecting its
                "An open offer is mostly made to           announcement, which should include        retail share holders) in Ispat               closing price i.e announcement day.      funds into the company. Hence in        higher offer price in favour of Inox
           acquire a company (by non-promoter)             offer price, number of shares to be       Industries. Earlier, JSW entered into        3) For the cause of delisting:           order to save investors' interest,      and petitioned SEBI that the deal was
           or to save the company from any                 acquired from the public, purpose of      a Rs. 2,157 crore deals with Ispat to        During December 2010, the promot-        SEBI directed former chairman to        against the "protection of the inter-
           acquisition (by the promoter)," says            acquisition, identity of the acquirer,    acquire a 41.29 per cent stake in the        ers of Nirma Ltd. announced an           make an open offer to other share-      est of minority retail shareholders."
           Pramod Sultania, CEO, Nikunj Stock              future plans, details about Target        latter through preferential issue of         open offer in respect to delisting of    holders. Following the order, the       Now, RMW has acquired around 16
           Brokers. He explains generally a pro-           Company, procedure of accepting the       fresh shares at a price of Rs 19.85          its fully paid-up equity shares. The     scrip of Pyramid Saimira Theatre        per cent through open market opera-
           moter company makes an open offer               shares and the time period for this.      apiece. The shares of Ispat grew by          promoters of Nirma intended to           (PSTL) soared more than 55 per cent     tions while Inox owns 50.48 per cent
           in order to restrict any takeovers by           The acquirer has to pay the consid-       40 per cent in 10 days of acquisition        acquire all outstanding shares, i.e.     on the BSE in just three trading ses-   in Fame. In 18 trading sessions, the
           any other company. They also do it for          eration to shareholders within 15 days    process.                                     22.83 per cent, currently held by the    sions.                                  share price of Fame saw a jump of
           increasing demand by creating short-            from the date of closing of the offer.    2) For raising stake: During May             public shareholders.                     5) Hostile Takeover: On December        around 110 per cent.
           50   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                              1-15 April, 2011   MONEY MANTRA   51
EP-50-72akm.qxd   3/29/2011        2:02 PM         Page 4

                                                                                                                                                     amount for purchase of a piece of land,
                                                                                                                                                     which may fetch you better returns over
                                                                                                                                                                                                                                         Home Loan Junction
                                                                                                                                                     a period of time. But if you think that         Home Loan EMI/Rs 100,000 for a loan amount of Rs 30 Lakh as on March 21, 2011
                                                                                                                                                     interest on the present loan is eating                                    5 years        10 years       15 years       20 years
                                                                                                                                                     away your profits, and you can improve                                    FIXED FLOATING FIXED FLOATING FIXED FLOATING FIXED FLOATING
                                                                                                                                                     you business income substantially, you       Allahabad Bank               2212 2149      1449 1378      1233 1152      1119 1066
                                                                                                                                                                                                  Axis Bank                    2327 2112      1553 1308      1332 1059      1244 949
                                                                                                                                                     may take a decision to adjust the loan
                                                                                                                                                                                                  Bank of Baroda               DP 2125        DP 1335        DP 1090        DP 998
                                                                                                                                                     and can breathe carefree.
                                                                                                                                                                                                  Bank of Maharashtra          2137 2100      1363 1308      DP 1075        DP 965
                                                                                                                                                                                                  Canara Bank                  DP 2125        DP 1335        DP 1105        DP 998
                                                                                                                                                     Sir, I am in need of some money. I

          BANKING WITH                                                                                                                               have shares, insurance policy, a plot
                                                                                                                                                     of land and also gold which I could
                                                                                                                                                     pledge. The need for money may
                                                                                                                                                                                                  Central Bank of India
                                                                                                                                                                                                  HDFC Limited
                                                                                                                                                                                                  ICICI Bank
                                                                                                                                                                                                  IDBI Bank
                                                                                                                                                                                                                               DNA 2125
                                                                                                                                                                                                                               2199 2112
                                                                                                                                                                                                                               2432 2125
                                                                                                                                                                                                                               2237 2137
                                                                                                                                                                                                                                              DP 1349
                                                                                                                                                                                                                                              1406 1308
                                                                                                                                                                                                                                              1675 1322
                                                                                                                                                                                                                                              1449 1335
                                                                                                                                                                                                                                                             DP 1105
                                                                                                                                                                                                                                                             1168 1059
                                                                                                                                                                                                                                                             1469 1075
                                                                                                                                                                                                                                                             1216 1090
                                                                                                                                                                                                                                                                            DP 998
                                                                                                                                                                                                                                                                            1066 949
                                                                                                                                                                                                                                                                            1391 965
                                                                                                                                                                                                                                                                            1119 982

                                                                                                                                                     increase by time, and hence I might          Indian Bank                  2174 2137      1392 1349      1168 1121      1084 1032
                                                                                                                                                     need different loan at different             LIC Housing Finance*         DP 2122        DP 1319        DP 1072        DP 962
                                                                                                                                                     intervals. Kindly, tell me the order         Oriental Bank of Commerce    DNA 2125       DNA 1335       DNA 1105       DNA 998
                                                                                                                                                     of pledging the assets.                      Punjab National Bank         2149 2125      1363 1335      1121 1090      1032 998
                                                                                                                                                                                                  SBI Easy Home Loan           DP 2064        DP 1253        DP 999         DP 884
                                                                                                                                                     You have not mentioned the purpose
                                                                                                                                                                                                  UCO Bank                     DNA 2137       DNA 1349       DNA 1121       DNA 1032
                                                                                                                                                     for which you need the loan. All the
                                                                                                                                                     banks do not offer loan against shares       PN: The rates given above are for the 1st year of the loan tenure. For the subsequent years, the interest
                                                                                                                                                                                                  rates vary from bank to bank. * These banks have interest rates fixed for the initial few years and there-
                                                                                                                                                     since it is a risky proposition due to its   after then prevailing rate are applicable.The home loan rates are indicative rates, which may change
                                                                                                                                                     volatility. Loan against gold too is         according to the credit profile of the customer. Fixed Interest Rates are usually subject to reset clause of
                                                                                                                                                     considered only by few banks and             two to five years and vary from bank to bank. However, fixed Interest Rates of ICICI Bank, HDFC
                                                                                                                                                                                                  Limited and Axis Bank remain fixed during the entire tenure of the loan
                                                                                                                                                     these have formulated their own              DP - Do Not Provide       DNA: Data Not Available
                                                                                                                                                     schemes and framed specific guide-
                                                                                                                                                                                                        Fixed Deposit Interest Rates (upto - Rs. 15 lakhs as on 21 March. 2011)
                                                                                                                                                     lines for sanction of such loans. LIC
                                                                                                                                                     policy and land can be accepted by the       BANKS                    6mths - < 1        1 – < 2 Year        2 – < 3 3 – < 5 Year 5 Years &
                                                                                                                                                                                                                           Year                                   Year                 above
                                                  Sir, I had kept Rs 3 lakh as deposit in        ment, but if you withdraw the amount and            banks as collateral security for grant
                                                  my bank, PNB, a year ago. It is a three-       deposit with some other bank, then you              of loan but borrower must specify the        Bank of Baroda           6.25% - 7.50% 9.00% - 9.35% 9.00% 8.50% - 9.00% 8.50%
          All the banks do not                    year fixed deposit and the bank is offer-      have to shed at least 1% more as penalty.           purpose for which the loan is required.
                                                                                                                                                                                                  Bank of India       8.00%         9.00% - 9.25% 8.25% 7.75% - 8.25% 8.50% - 8.75%
                                                  ing 7.5% interest rate. Now the bank is        If you reinvest the deposit in one year             Few banks consider request for mort-
          offer loan against                      offering 9% for one year deposit. Can          scheme of the bank, then the interest loss          gage loan but borrower must submit
                                                                                                                                                                                                  Bank of Maharashtra 6.50% - 7.25% 8.55%         8.55% 8.30% - 8.60% 8.00% - 8.30%

          shares since it’s a                     I request my bank to convert my                on existing deposit may be even more than           the time frame for repayment of loan         Canara Bank              7.75%              8.75% -9.10% 8.75% 8.50% - 9.25% 8.75% -
                                                                                                                                                                                                                                                           -9.10%              9.50%
          risky proposition.                      deposits from previous FD scheme into          what you will get as additional interest.           and the source of repayment.
                                                  the new scheme? Will the conversion                                                                                                             Central Bank of India 9.20%                 9.25% - 9.60% 8.75% 8.80%                      8.80%
          Loan against gold                       cost me? How to calculate whether this         Sir, I am a small businessman. I took a             Sir, I lost my passbook andATM               Corporation Bank         9.15%              9.15%               9.25% 9.25%                9.00%
          too is considered                       conversion will be useful for me or not?       business loan of Rs 3 lakh nearly a year            card while travelling. I came to             Dena Bank                8.00%              9.00%               8.75% - 9.00%              8.75%
                                                       Nowadays banks are offering very          back. Recently, I have sold a plot and              know about it three days later. I                                                                            9.00%
          only by few banks.                      attractive return on fixed deposit of vari-    have received Rs 4 lakh form that.                  informed my bank. Kindly tell me             Indian Overseas Bank 7.25% - 8.25% 8.75% - 9.25% 8.75% 9.00%                               9.00%
          LIC policy and land                     ous maturities. Banks have floated deposit     Should I prepay the loan amount?                    the procedure to get the passbook
                                                                                                                                                                                                  Oriental Bank of         7.25% - 7.50% 9.00% - 9.25% 8.75% - 8.50%                         8.50%
                                                  schemes for 400 days, 700 days, 1100 days      Kindly suggest as to what is beneficial             and ATM card again? Bank has told
          can be accepted by                      with return of more than 9%. This is on        for me.                                             me to lodge an FIR.
                                                                                                                                                                                                  Commerce                                             9.00%

          the banks as                            account of liquidity problem encountered       It appears as if you have a pressure of busi-        As you said you have informed the           State Bank of India 6.00% -7.75% 8.25% - 9.25% 8.75% - 8.25%
                                                                                                                                                                                                                                                                                             8.50% -
          collateral security                     by the banks. The situation is likely to       ness loan on the back of your mind, and you         bank about the loss of important doc-
                                                  continue till March 2011 and may contin-       want to get rid of it. I will suggest that if you   uments, the bank must have blocked           Syndicate Bank           9.00% - 9.15% 9.25%                    9.25% 9.00%                8.60%
          for grant of loan but                   ue for some more time.                         have taken this loan from bank and you              and deactivated the ATM card. Filing         Union Bank of India 7.50%                   8.00% - 8.60% 8.75% 8.75% -                    8.50% -
                                                       In your case, you are holding the         are repaying the loan installments on time,         FIR is a necessary formality for issue                                                                       9.15%                      9.40%
          borrower must
                                                  deposit which is giving a return of 7.5%       and you abide by the terms and conditions           of a fresh ATM card and duplicate            Vijaya Bank              7.50%              9.25% - 9.35% 9.25% 8.50%                      8.25%
          specify the purpose                     only. I will suggest that you may find from    laid down in the loan agreement, then there         passbook. In case of any problem, you        Axis Bank                7.25% - 8.25% 9.00% - 9.25% 8.50% 8.50%                           8.50%
          for which the loan is                   your bank the best scheme available for        is no need to be worried on this account.           can contact higher official. However,
                                                                                                                                                                                                  Development Credit 6.50%                    7.75% - 9.00% 7.75% - 7.75%                    7.50%
                                                  investing the amount for a longer period.           On the contrary you should build your          the bank may recover from you nom-
          required. Few banks                     If there is any deposit scheme for more than   credibility, which may be useful, for you           inal charges for issuance of ATM card
                                                                                                                                                                                                  Bank                                                      8.50%

                                                                                                                                                                                                                                                                                                                 Source: Apnapaisa Research Bureau
          consider request for                    two years and offers 9% or more interest,      to get support from the bank to meet your           and duplicate passbook. The details of       HDFC Bank                6.00% - 7.75% 8.25% - 8.50% 8.50% - 8.25%                         8.25%
          mortgage loan but                       you may request the bank to reinvest the       various banking needs in future, viz. edu-          service charges are displayed on their
                                                  amount pre-maturely in that scheme. When       cation loan for children, home loan, vehi-          website.                                     ICICI Bank               6.00% - 7.50% 8.25% - 9.25% 8.50% - 8.75%                         8.75%
          borrower must                           you reinvest the amount with the same          cle loan or additional loan to expand your

                                                  bank, you will earn interest on your exist-    business. You can utilise the money which                                                        ING Vysya                7.00% - 8.00% 8.50% - 9.25% 8.75% 8.75%                           8.75%
          submit the time                                                                                                                            Virendra Kumar Dhingra is a post-grad-
                                                  ing deposit at the rate applicable for the     you have received out of the sale proceed           uate in Commerce with over forty years       IDBI Bank                7.75% - 8.00% 8.00% - 9.25% 9.00% 9.00% -                         8.75% -
          frame and source of                     period for which deposit has been main-        of the plot for further expansion of business       of experience in banking. He retired as                                                                 9.25%                           9.00%
                                                                                                                                                     Executive Director, UCO Bank. Currently,
          repayment of loan.                      tained (prevalent at the time of deposit)      if there is good scope for expansion in your        he is Director, Industrial Investment Bank   The Federal Bank 8.75% - 9.25% 9.40%           9.00% 9.00% - 9.25% 8.75%
                                                  without any penalty for premature pay-         area. Alternatively, you can invest this            of India Ltd.                                Kotak Mahindra Bank 6.25% - 8.00% 9.00%- 9.40% 9.25% 9.25%         9.25%

           52   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                                       1-15 April, 2011   MONEY MANTRA      53
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           MUTUAL FUND
                                                                                                                                                                                                                                                THE PRODUCT, GOLD FUND

                                                                NOW, INVEST IN                                                                                                                                                              Gold fund is an open ended fund of fund
                                                                                                                                                                                                                                            scheme, which allow investments in
                                                                                                                                                                                                                                            gold units without a demat account and
                                                                                                                                                                                                                                            have SIPs as well, something which
                                                                                                                                                                                                                                            was not available with gold ETFs. Gold

           GOLD VIA SIP
                                                                                                                                                                                                                                            fund typically invest in gold ETF and
                                                                                                                                                                                                                                            tries to replicate its performance.
                                                                                                                                                                                                                                            WHAT IT MEANS TO CUSTOMERS?
                                                                                                                                                                                                                                            Gold Savings Fund is pitched as a good
                                                                                                                                                                                                                                            option for small investors who want to
                                                                                                                                                                                                                                            invest in gold. It has opened the doors
                                                                                                                                                                                                                                            for non-demat account holders as it pro-
                MM Bureau                                                                                investment in gold can be made with-                                                                                               vides the facility to invest through the
                                                            The introduction of                          out a demat account. Unlike ETFs, it                                                                                               online medium and through the physi-
                                                                                                                                                                                                                                            cal application mode.

                 t is only Sachin Tendulkar and            Reliance Gold Fund and a                      also provides an SIP option for invest-

           I     Gold which are making records
                 these days. Sachin is doing won-
                 ders in the cricket World Cup
           while gold's price is making news the
           every other day. In the last 10 years the
                                                           similar scheme from
                                                           Kotak which provide the
                                                           facility of SIP and don't
                                                                                                         ing. While Reliance has a minimum
                                                                                                         SIP limit of Rs 100 per month, Kotak
                                                                                                         allows investors to start their SIP with
                                                                                                         Rs 1,000 per month. Mukesh Gupta,
                                                                                                         director Wealthcare Securities, says:
                                                                                                                                                                                                                                              WHAT IT MEANS TO COMPANIES?
                                                                                                                                                                                                                                            Reliance and Kotak have tried to reach
                                                                                                                                                                                                                                            a common class of people who did not
                                                                                                                                                                                                                                            have demat accounts and were inter-
                                                                                                                                                                                                                                            ested in investing in gold. It targeted the
                                                                                                                                                                                                                                            medium class which resembles a
           price of gold has gone up 6 folds and           require a demat account                       "With the introduction of SIP, gold                                                                                                majority of the population. It is expect-
           is still moving upwards. In the past                                                          funds will help retail investors invest                                                                                            ed that many more companies will
           few months, the price of yellow metal           to invest into them has                       in even smaller amounts." According                                                                                                launch similar products soon.
           has crossed the level of Rs 22000/10            come as a boon for small                      to him, this will allow small investors                                                                                                      OTHER BENEFITS
           grams. The jump is phenomenal and                                                             to benefit from the gold rally which                                                                                               Investors of gold fund can also enjoy fea-
           has made those people wealthy who               investors.                                    hitherto they could not due to shortage                                                                                            tures like Systematic Withdrawal Plan
                                                                                                                                                                                                                                            (SWP), Systematic Transfer Plan (STP),
           had invested in the commodity. What                                                           of funds.                                                                                                                          auto switch and trigger facility. Also,
           is more interesting here is that no                                                               These two gold funds invest in                                                                                                 returns from gold exchange traded
           experts are advising to book profit at          minimum capital needed to invest in           gold ETFs of their respective fund                                                                                                 funds do not attract wealth tax, as is the
           such higher levels rather they are              gold ETF could be as high as Rs               houses and their performance close-                                                                                                case with physical gold transactions.
           anticipating the prices to go further up        20000. Lastly, if someone needs to            ly correlates to that of physical gold.                                                                                                       ITS EXPENSIVE
           and hence recommending a buy for                repurchase the ETF units, he has to           Gold funds are a bit expensive in                                                                                                  Since the two is a fund of fund (FOF)
           the commodity.                                  consider the quantity of buying. For          nature. Since the two is a fund of fund                                                                                            scheme which tracks gold ETF, there is
                Today, gold has turned out to be           example, in most cases one unit of            (FOF) scheme which tracks gold ETF,                                                                                                an ETF expense as well as FOF charges
                                                                                                                                                                                                                                            that one needs to pay. Typically, gold will
           the most trusted investment avenue              gold ETF is equal to one gram of gold.        there is an ETF expense as well as                                                                                                 cap the overall cost (FOF + ETF
           for the masses. It has been observed in         This means even if someone is the             FOF charges that one needs to pay.                                                                                                 charges) between 1.5-2.0 % annually as
           the past five years that investment             buying the least, say 1 unit, he will still   Typically, gold will cap the overall                                                                                               against 1.0-1.25% in ETF.
           demand for gold has out-paced the               have to pay Rs 2100-2200 (depending           cost (FOF + ETF charges) between
           jewellerry and other demands.                   upon the prices). This had made small         1.5-2.0 % annually as against 1.0-            Rs13bn as in Dec-09. Also, while gold       comes within days of the launch of       (2005-2010), returns on gold
           Financial companies took this as an             investors to sit quietly and watch the        1.25% in ETF.                                 prices rose 19%, AUMs under gold            Reliance Gold Savings Fund. Similar      (+22%) have beaten that of the
           opportunity and came up with new                gold rally. But then it is also true that                                                   ETFs in India rose close to 3 times.        to Reliance, this is another fund-of-    Sensex (+17%), making it all the
           innovative investment products. In              the customer base of such investors           Potential from the point of ETF               Now, when even small investors will         fund scheme. It's a gold ETF based       more attractive investment destina-
           commodity markets one can today                 is very large, and one cannot afford              ETF is an exchange traded fund            be able to participate, one can think       fund-of-fund scheme which will           tion. To en cash the opportunity,
           find products like gold futures and E-          to overlook them.                             whose units can be bought and sold on         of the potential of the gold fund.          invest only in Kotak gold ETFs.          investors used the gold ETF route.
           gold. But, not everybody is comfort-                                                          exchange in real time, similar to that                                                    Kotak allows investors to start their    Now the recent launch of gold mutu-
           able with trading in the commodity              Say 'yes' to gold fund                        like share trading. In case of gold ETF,      Reliance Gold savings Fund                  investment with Rs 1,000 per month       al fund schemes from Reliance and
           market.                                             To en cash such customer base,            the units represents a quantity of gold            Reliance Gold Savings Fund is the      through an SIP (systematic invest-       Kotak Mutual Funds could be a turn-
                In mutual fund space also one can          Reliance Mutual Fund and Kotak                and is kept in the demat account of           first gold fund-of-funds in the indus-      ment plan) route.                        ing point for retail investment in
           find gold investment products like              Mutal Fund has come out with their            investors. Gold ETFs caught the atten-        try. It seeks to provide returns that                                                gold. What both company has essen-
           Gold ETF and world gold fund.                   gold investing scheme called gold             tion of investors in a big way in the         closely correspond to returns provid-       Conclusion                               tially done is converted an ETF into
           Although both products, especially              funds. Gold fund is an open-ended             past few years. It is due to this fact that   ed by Reliance Gold Exchange Traded             Globally, the demand-led prices      a mutual fund product. "With sys-
           ETF, are attracting a lot of investors,         fund, which invest in gold ETF and            in India, assets under management             Fund which in turn invests in physi-        for gold went up because of a num-       tematic investment plans (SIPs)
           they too have their limitations. World          tries to replicate its performance. Till      (AUM) of gold ETFs have swelled               cal gold. It will invest in Reliance        ber of factors which include geo-        starting at as low as Rs100/month,
           gold funds do not invest in pure gold           sometime back, an investor who                to Rs 3,500 crore from a mere around          Gold ETF. The scheme's performance          political tensions, rise in crude        the funds is likely attract a large
           but in gold mining companies and                wished to invest purely in gold               Rs 100 crore four years ago. Notably,         will be benchmarked against the price       prices, instability in various           number of investors," says Anil
           hence may not give returns equivalent           through the MF route had only one             while only one Gold ETF was                   of physical gold. In the fund, entry        economies, short in supply etc.          Rego, CEO, Right Horizons, a
           to that of pure gold. But while in ETFs         gateway i.e. of ETF. To deal in ETF,          launched in 2009, four Gold ETFs              load is nil and exit load is 2%, if exit-   Along with them, in India, the price     wealth       management       firm.
           investments are made in gold, manda-            an investor needs to have a demat             were launched in 2010, taking the total       ed within one year.                         of gold has been gathering pace with     According to Rego, it is expected
           tory here is to have a demat account            account in order to perform purchase          number of ETFs up to 10 now. AUM                                                          the rising purchase of gold coins,       that other fund houses will also
           where the units bought are kept in              and sale of gold units at the exchange.       under these 10 ETFs stood at Rs 33bn          Kotak gold fund                             bars, jewellery etc. In terms of price   launch similar such schemes
           electronic form. Apart from this, the           But with the coming up of gold funds,         at the end-Dec'10, as compared to                 The Kotak Gold Fund launch              performance, on a 5-year horizon         going forward.
           54   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                       1-15 April, 2011   MONEY MANTRA   55
EP-50-72akm.qxd   3/29/2011        2:02 PM        Page 8

                                                                                                                                                                                                                                            MF and Commission
                                                           COMMISSION EARNED BY                                                                                                                                                             After the scrapping of entry load,
                                                                                                                                                                                                                                            investors have to pay fees, agreed
                                                                                                                                                                                                                                            upon through mutual discussion, to dis-

           MF DISTRIBUTORS                                                                             cations and hence this has to be taken
                                                                                                                                                                                                                                            tributor for the services being provided.
                                                                                                                                                                                                                                            This requires some effort on the part
                                                                                                                                                                                                                                            of each investor when they are deal-
                                                                                                                                                                                                                                            ing with a distributor so that they are
                                                                                                                                                                                                                                            able to make a proper evaluation.
                                                                                                                                                                                                                                            Apart from fees, investors should also
                                                                                                                                                                                                                                            check out commissions earned by the
                                                           In many cases investors                     into consideration when they are look-                                                                                               distributors.

                                                           have no interest in                         ing at the manner in which they will                                                                                                 SEBI has said that the distributor has
                                                                                                       make some of the decisions related                                                                                                   to inform investor about the commis-
                                                           knowing what the                            to the mutual fund. The commission                                                                                                   sions that they receive from the mutu-
                                                                                                                                                                                                                                            al fund.
                                                           distributor is actually                     paid to a distributor will consist of an
                                                                                                                                                                                                                                            Investor has to understand that there is a
                                                                                                       upfront commission which is the
                                                           earning. They are more                      amount that is received for the purpose                                                                                              difference between various types of com-
                                                                                                                                                                                                                                            missions that are earned by distributor.
                                                           interested in other                         of getting the initial investment into
                                                                                                                                                                                                                                            The commission paid to a distributor
                                                                                                       the fund. This is the figure that the dis-                                                                                           will consist of an upfront commission.
                                                           aspects of the                              tributor will earn immediately and is
                                                                                                                                                                                                                                            It is the amount that is received for the
                Arnav Pandya                               investment, including                       usually a percentage figure based on                                                                                                 purpose of getting the initial investment
                                                                                                       the amount that is brought in.                                                                                                       into the fund.
                 nvestors need to know certain             returns but for all the                     Sometimes there is also a flat payment

           I     details when they are investing in
                 a mutual fund. A lot of the infor-
                 mation obtained is useful for
           making investment-related decisions
           but some of it is received because it
                                                           investors if they need this
                                                           information, then all that
                                                           they need to do is ask the
                                                                                                       for large number of applications, espe-
                                                                                                       cially in case of a new fund offer. The
                                                                                                       other type of commission is the trail
                                                                                                       commission. This is the figure that is
                                                                                                       earned by the distributor when the           should know the details. However, in        checking on their own by looking up
                                                                                                                                                                                                                                            It is the figure that the distributor earns
                                                                                                                                                                                                                                            immediately and is usually a percentage
                                                                                                                                                                                                                                            figure based on the amount that is
                                                                                                                                                                                                                                            brought in.

                                                                                                                                                                                                                                            lic but once again there are some prac-
           has to be supplied as per the provisions        distributor about it.                       investor remains with the fund for a         reality there is no standard way in         the commission structure and under-         tical problems that will have to be
           of the law. This area covers some                                                           specified period of time on a contin-        which this process is completed so dis-     standing this would be a tough task.        tackled. The display has to be clear
           details related to the commission that                                                      uous basis. This payment is usually          tributors adopt their own ways of con-                                                  about the commission that is earned
           is earned by the distributor when they          effort on the part of each investor         made by the fund to the distributor          ducting it.                                 Range of people                             but this could be different for various
           use their services. However, in reali-          when they are dealing with a distrib-       on an annual basis.                                                                           The other point that also makes the    fund houses. This means that the exact
           ty there is a lot of ignorance as well          utor so that they are able to make a                                                     Display on websites                         entire process difficult to implement       figure is not available but a range is
           as disinterest among the investors              proper evaluation.                          Process                                          Often distributors find it difficult    is that there are a range of people who     and the investor then has to figure out
           about this matter and that is the reason                                                         The way in which this entire dis-       to give the exact information across to     are dealing with the investor from the      what is the exact amount that the dis-
           that they need to put in some efforts on        Commission                                  closure process should actually work         the investors, especially when the vol-     side of the distributor, especially when    tributor will earn. The other thing is
           this front.                                         Apart from the direct payment of        is that when the investor goes to a dis-     ume of investors that they service is       the activities are on a larger scale. In    that there is also a situation where
                                                           the fees there is another issue that also   tributor for the purpose of making an        high as this situation makes the actu-      such a situation getting everyone of        there are different categories of funds
           No load                                         has to be addressed when the distrib-       investment there will be several things      al implementation difficult in real life.   them to know about the exact commis-        and there are multiple structures in
               Currently, the no load system is            utor is dealing with the investors. This    that are discussed between them. This        An option that has been suggested for       sion can be a difficult task for the dis-   place for the various commissions.
           in force which means that the                   deals with the commissions that are         will include the amount that has to be       this has been to put up the commission      tributor to achieve. Also there are a       This also makes the implementation
           investors do not face any entry load            earned by the distributor from the          invested along with the actual funds         on the websites of the mutual fund or       lot of changes that are taking place at     quite difficult because even when the
           when they make their investment into            mutual fund. The Securities and             that are chosen for this purpose. Along      that of Association of Mutual Funds in      a regular basis and hence even keep-        details about the various categories are
           a mutual fund. This absence of load             Exchange Board of India has said            with the other information the dis-          India (AMFI). This will provide an          ing up with the details as and when the     put up, getting the investor to under-
           ensures that the investor gets the units        through a circular that the distributor     tributor has to inform the investor          independent route whereby the               changes occur and then getting this         stand what is actually applicable for
           allocated to them at the Net Asset              has to inform the investor about the        about the commission that is earned          investor can actually check out the         information across is not easy. This        them is not an easy task.
           Value (NAV) of the fund and there               commissions that they receive from          both at the time of investment as well       exact commission that is being earned       can take up a lot of time and effort
           are no charges added to this figure.            the mutual fund. This will enable the       as later on a trail basis. This is meant     by the distributors.                        and this might not be very productive       Investor apathy
           There is a fallout of the no load situ-         investor to get a proper picture of what    to ensure that there is complete trans-          While this is a transparent way of      as it could drive attention away from           The final point that is also to be
           ation because this also means that              the distributor is actually earning and     parency in the entire matter and there       completing the requirement, it can be       the aspect of investing.                    considered is that in many cases the
           there is just a small amount of com-            many of them also take this into            is proper knowledge on the side of           impractical because of the fact that                                                    investors have no interest in know-
           mission that is earned by the distrib-          account while evaluating the invest-        the investor about the details.              there are not many investors who            Display                                     ing what the distributor is actually
           utors of the mutual funds as compared           ment options suggested.                          The actual process is meant to be       would be savvy enough to go to the              One route that can be used for the      earning. They are more interested in
           to the situation earlier, when they get                                                     conducted in such a manner that there        internet and check out the exact com-       purpose of proper spread of the infor-      other aspects of the investment,
           an investor to invest into a fund. The          Types of commission                         is information given about the com-          mission that the distributor would be       mation related to this area is through      including returns but for all the
           investors have to pay the fees to the               The investor has to understand          mission earned from various compet-          earning. A large number of investors        an open display in the office of the dis-   investors if they need this information,
           distributor for the services provided           that there is a difference between the      ing schemes to the investor. This does       have problems just differentiating          tributor about the various commis-          then all that they need to do is ask the
           depending upon the value that they              various types of commissions that are       not mean that the distributor cannot         between various funds that are offered      sions that are being earned. This is a      distributor about it.
           attach to it that is agreed through             earned by the distributor. The exact        recommend a fund that has a higher           by the mutual funds. In such a situa-       simple way to operate as here the                           (The writer is Chief Coach
           mutual discussion. This requires some           feature of each type has its own impli-     commission but just that the investor        tion asking them to actually do all the     information can be displayed in pub-                           at FinCare Consulting)
           56   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                       1-15 April, 2011   MONEY MANTRA   57
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                                                                                                                                                                                                                                                       Why mis-selling happens…
           INSURANCE POLICIES                                                                                                                                                                                                                         Customers buy insurance policies
                                                                                                                                                                                                                                                      thinking that these would give better
                                                                                                                                                                                                                                                      returns. Agents make good use of this

           FALLING PREY TO MIS-SELLING                                                                                                                                                                                                                After agreeing to buy a financial prod-
                                                                                                                                                                                                                                                      uct, customers are seen in a hurry
                                                                                                                                                                                                                                                      most of the times to wrap up the pro-
                                                                                                                                                                                                                                                      cedure at the earliest.
                Alok Dwivedi                                There are various reasons                         faith in agents and this is the main rea-                                                                                               Lack of interest on the part of cus-
                                                                                                              son of mis-selling of insurance policies.                                                                                               tomers to go through the details and

           Do you know the meaning of mis-sell-             why mis-selling of                                These agents act as more than an agent                                                                                                  fine prints of the policies.
           ing? Some of you would say yes and                                                                 and are seen playing the role of finan-                                                                                                 Most of the customers have blind faith
           maybe a few would say no. But I am sure
                                                            insurance policies takes                          cial advisors. In a number of cases,                                                                                                    in agents and this is the main reason
           about one thing, most of you would have          place. While insurance                            agents are relatives of potential cus-                                                                                                  of mis-selling of insurance policies.
           been a victim of mis-selling in one way                                                            tomers and customers don't feel like                                                                                                    Most of the customers end up buying
           or the other. Mis-selling is all about mis-
                                                            agents often mis-sell a                           saying no. This 'hesitancy in saying no'                                                                                                wrong product in order to fulfill their
           leading investors about the features of          product to earn                                   leads to a situation where customers                                                                                                    need to save tax.
           a product. In order to sell the product                                                            go on buying a number of useless poli-                                                                                                  Tendency of the customers to seek
           to a customer, the salesperson may hide          commission, customers                             cies. In other cases, these agents are                                                                                                  free advice pushes them to buy prod-
                                                                                                                                                                                                                                                      ucts they actually don't need.
           certain information. Another way of              too are responsible for                           associated with the families from 20-25
           doing it is by describing the product of                                                           years. The agent, once in a while, comes
           being urgent importance or need to the           buying wrong products as                          with a new product (with wonderful fea-         Normally, customers are attract-           ment options can offer high returns
           customer. In a nutshell, selling prod-           in most cases it is seen                          tures!) and the family ends up buying       ed to policies by insurance cover and          (which is practically not possible).         Arithmetical gimmicks
           ucts to customers on the basis of wrong                                                            that. In addition, there are customers      better returns. But there are cus-                                                              Arithmetical gimmicks play a very
           information, and selling wrong products          they are not bothered to                          who have utmost trust on a few estab-       tomers who don't get attracted by              Lock in period                               important role. Same things can be
           with correct information to a person who         know about the policy or                          lished organisations. When a represen-      these two things. Insurance compa-                 A few agents don't tell customers        shown differently by using different sets
           doesn't need them both falls under the                                                             tative of such an organisation approach-    nies know such mentality of cus-               about actual lock in period of policy.       of words. For example, when agent
           category of mis-selling. There are var-          cross-check the details                           es them, these customers tend to buy        tomers and they have a bit different           Multiple premium policies, which require     says, "Sum assured of policy A is 250
           ious reasons due to which such mis-sell-         provided by the agent.                            products of these companies without         way to woo them. Such customers are            several premiums, are sold by agents as      times the monthly premium throughout
           ing takes place. Let us discuss a few of                                                           giving them a second thought.               offered a four in one product and cus-         single premium policies. Therefore, cus-     the term", it works in his favour.
           those reasons.                                                                                                                                 tomers get attracted to this offering -        tomers tend to buy high premium policies     Customer gets attracted to buy the same.
                                                                                                              Term plan is useless                        - better returns, tax saving, life cover       (they think that they have to pay only
           Insurance as investment                          don't want to get into the details of the prod-       A number of customers think that        and cash back.                                 once). But it becomes difficult for them     Free financial advice
                The level of financial literacy is still    ucts and their mere interest limits to the        buying term plan is a waste of money                                                       to pay same amount every year.                    Be it a middle class person or high
           very low even in literate fraternity of          documents he/she is supposed to produce.          as they don't offer returns. Agents try     High returns                                                                                net worth individual, there is a common
           the country. Customers go on buying              When the company representative pro-              to lure those customers with other               Every investor, who has simple            Rebate on premium                            thing in most of the customers. They
           insurance policies thinking that these           vides some document, they don't bother            tricks. These customers are attracted by    knowledge about financial things,                   Another way of attracting customers     believe that there is no point in paying
           would give better returns. This very first       to read them properly. They don't spend           a bit different insurance products          knows that every option of investment          is by offering rebate on premium. While      for financial advice when he/she can get
           step of customers of buying the insurance        time studying the features of the prod-           (ULIPs) which not only offer life           has its limitations as far as returns are      selling the policy, agent says that he/she   it for free. Such customers seek free
           policy for better returns is wrong.              ucts either. "Please tick the places where        cover, but also give returns on the pre-    concerned. Savings account of bank             would give a rebate of 5 per cent on the     financial advice from every agent or
           Insurance policies are meant to offer cover      I am supposed to put my signature"- is            mium paid. But this attraction cost         would give you 3.5 per cent return annu-       first premium. Customers get attracted       distributor. They ask for a better prod-
           and these should not be bought with a view       the normal response of customers while            them heavily as it is much dearer in        ally. Fixed deposits would offer you 8-        to such promises. Agents pay that            uct or two in every meeting. This 'free
           to fetching returns. But not only insurers       buying financial products? (They are the          comparison to term plans. It is impor-      9 per cent annual return generally. But        amount to customers from their com-          advice' gives way to mis-selling of
           sell insurance policies as an investment         same customers who look at every toma-            tant to note that agents get more com-      greed is a monster. When an agent shows        mission (it is not a bad bargain for them    products. Such customers willingly buy
           product, customers too buy them for the          to thrice while buying). But when it              mission on ULIPs.                           the customers rosy pictures, then they         to return a few thousand rupees from         products which don't fulfill their
           same reason. Customers are shown dreams          comes to buying a policy, they think that                                                     don't hesitate to believe that a few invest-   commission).                                 needs at all.
           of better returns and they fall into the trap.   the job is done by merely putting some            Saving tax
           Let us have a simple example of mis-sell-
           ing. Arun Sharma, a businessman aged
           56, has no kids and his wife had passed
                                                            signs. The agent no doubt should give
                                                            the customers correct information, but
                                                            he tells them wrong things looking at
                                                                                                                  It is unfortunate but true that most
                                                                                                              of the customers end up buying wrong
                                                                                                              product in order to fulfill their need
                                                                                                                                                          Insurers to create nuclear insurance pool
           away a few years ago. He has a good              their carelessness. For example, some             to save tax. Almost 70-75 per cent              The nuclear crisis in Japan has led        is in the process of opening certain por-    also working on framing guidelines for
           amount of savings already. Technically,          customers would not even know about               insurance policies are bought in the        the government as well as the insurance        tions of nuclear plants for inspection       covering nuclear accidents. The
           he has no need of a term insurance as he         the free look period which is just 15             last three months of a financial year.      industry to speed up the development           by reinsurers to assess the risk, based      Nuclear Liability Bill, aimed at oper-
           has no dependent. If an agent sells him a        days. But if the agent would tell that            This data clearly indicates that most       of a nuclear insurance pool for simi-          on which a pricing model could be            ationalising India's civil nuclear deals
           term policy, it is a case of mis-selling.        the free look period is 3 months, they            of these policies are bought with the       lar accidents in the country. The gov-         developed.                                   with the US and other countries, was
                                                            would agree to that due to their lack of          sole purpose of saving tax.                 ernment has convened a meeting                      GIC was in talks with various glob-     passed by the Lok Sabha on August 25,
           Hurry leads to worry                             knowledge and would not even bother to            Therefore, most of the buyers actu-         involving the Nuclear Power                    al reinsurance firms for additional          2010. As against 4,000 MW current-
                After agreeing to buy a financial prod-     crosscheck it.                                    ally don't care about what they are         Corporation and General Insurance              capacity. A couple of reinsurers had         ly, India is all set to generate 20,000
           uct, customers are seen in a hurry most of                                                         buying.                                     Corporation (GIC), the only domes-             shown interest regarding participation       MW of nuclear power by 2020. As of
           the times to wrap up the procedure at the        Blind faith on agents                                                                         tic re-insurer in the country, to take         in the pool. The Insurance Regulatory        now, it accounts for three per cent of
           earliest. Whatever the reason may be, they           Most of the customers have blind              Four in one product                         stock of the progress. The government          and Development Authority (Irda) is          the total power generation in India.
           58   MONEY MANTRA     1-15 April, 2011                                                                                                                                                                                                              1-15 April, 2011   MONEY MANTRA   59
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                                                                                                                                                                                                                       Medical Insurance
                INSURANCE GURU                                                                                                               the expenses in case of any expens-                                       Age : 30 years Sum Insured Rs.300,000
                                                                                                                                                                                                                       Compare your Health Insurance Policy
                                                                                                                                             es arising out of hospitalisaiton.
                                                                                                                                             Please note here that pre-existing dis-         Name of   Name of the Premiu Renewabl Pre Existing  Sub Limts
                                                                                                                                                                                             the       Policy      m      e Upto   disease
                                                                                                                                             eases will not be covered under the             Companies                    Age      Covered After
                                                                                                                                             same policy for specified number of
                                                                                                                                             years which will differ from policy             Bharati       Smart       2,729/-        70           4 continuous       Room rent of 1% of Sum
                                                                                                                                             to policy. Details of the same are men-         AXA           Health Plan                             policy year        Insured per day
                                                                                                                                             tioned in the table below. Please note
                                                                                                                                             that we have taken sum assured of               ICICI         Comprehens 3,046/-         70           4 continuous       No Sub- Limit
                                                                                                                                             Rs 5 lakhs each for your father and             Lombard       ive Health                              policy year
                                                                                                                                             mother. Thus the total health insur-
                                                                                                                                             ance is Rs 10 lakhs.                            United        Mediclaim       3,609/-    Life Time Covered from          Room rent 1% of Sum
                                                                                                                                             Insurance      Yearly       Renewable           India         Policy                               day one               Insured per day or the
                                                                                                                                             Company        Premium of till what             Insurance     Platinum                             (Congenital           actual amount whichever
                                                                                                                                                            Sum Insured age                                                                     diseases not          is less.
                                                                                                                                                            of Rs.                                                                              covered)              I.C.U expenses : Room
                                                                                                                                                            500,000 each                                                                                              rent 2% of Sum Insured
                                                                                                                                             United India 24,971           Renewable                                                                                  per day or actual amount
                                                                                                                                             Insurance -                   till Lifetime                                                                              whichever is less.
                                                                                                                                             Policy Senior                                   Apollo        Easy Health 3,626/-        Life Time 3 continuous No Sub- Limit
                                                                                                                                             Citizen                                         Munich        Individual                           policy year
                                                                                                                                                           Co pay          Not                             Standard
                                                                                                                                                            Sub Limits  Room rent- 1% of     Star Health Medi Classic 3,640/-         80            4 continuous Room rent of 2% of Sum
                                                                                                                                                                        SA                                                                         policy year   Insured per day maxi-
                                                                                                                                                                        ICU - 2% of SA                                                                           mum to Rs 4,000/-
                                      Sir, I had bought health insurance cover           you will take for yourself will take care of all
                                                                                                                                                           PED Coverage After 3 con-         HDFC          Health          3,653/-    75            4 continuous No Sub- Limit
                                      from Oriental Insurance five years back.           your future goals of your family like your chil-                               tinuous claim
                                      Recently, I underwent a surgery, which I           dren's education and marriage when you have                                                         Ergo          Suraksha                                policy year
                                                                                                                                                                        free policy
                                      had intimated to the insurance company             them, retirement planning of the surviving                                     years.               Future        Health          3,932/-    70            4 continuous Room rent 1% of Sum
                                      well in advance. After the surgery, the com-       spouse etc for which you are investing. Your        Star Health - 27,198       80                   Generali      Suraksha                                policy year   Insured per day and
                                                                                                                                             M e d i                                                       Golden                                                I.C.U expenses :Room
                                      pany denied the claim, citing that we did not      wife's income will continue to take care of the     Classic                                                                                                             rent 2% of Sum Insured
                                      submit the claim within the time limit of five     regular household expenses and hence your life                                                                                                                          per day to a maximum of
                                                                                                                                                            Co pay         Not
                                      days from the date of discharge from the           insurance requirement is much lower.                                              Applicable                                                                            35%. Surgeon fees up to
                                      hospital. I submitted the claim within 40              The sum assured for your wife will take                        Sub Limits     Room       Rent                                                                       35% of the Sum Insured
        Most of the                   days from the date of discharge. What              care of the regular expenses and you contin-                                      ,General- 2% of                                                                       per claim. OT Charges :

                                      should I do now?                                   ue to save your income towards planning your                                      SI,        Max                                                                        Up to 40% of the Sum
        mediclaim                         Most of the mediclaim policies have a          goals the way you are doing now.                                                  Rs.4,000 per                                                                          Insured per claim.
                                                                                                                                                                           day, ICU- 2% of
        policies have a               clause mentioned in the policy where you have          Below are the premium rates mentioned for                                     SI,        Max
                                      to submit the claim within certain number of       a 30-year-old male, for a term of 30 years who                                    Rs.4,000 per      National      Mediclaim       3,988/-    80            4 claim free      Room rent 1% of Sum
        clause mentioned              days (5 days in case of your policy) in the        is not a tobacco user for a sum assured of Rs                                     day, Medical OT   Insurance     Policy                                  policy year        Insured Per day to a
                                                                                                                                                                           Charges - No
        in the policy                 mediclaim policy. This is to prevent fraud and     50 lakhs.                                                                         Limit
                                                                                                                                                                                                                                                                      maximum of Rs
                                                                                                                                                                                                                                                                      5000.I.C.U expenses
        where you have to             enable cross verification, if required. But in     Name of the plan            Premium (in Rs.)                       PED Coverage After 4 con-                                                                                 :Room rent 2% of Sum
                                      case of some genuine reasons, if you are not       ICICI Pru Life - iProtect   6,783/-                                                                                                                                          Insured per day to a max-
                                                                                                                                                                         tinuous poli-
        submit the claim              able to submit the claim within those 5 days,      Kotak Life - e-Preferred    6,783/-                                             cy years.                                                                                    imum of Rs.10,000.
                                      then the insurance companies attend to the         Term Plan                                                                                                                                                                    Surgeon fees : Maximum
        within certain                same. You can log in a complaint with the insur-                                                       A p o l l o 27,575            Renewable                                                                                  limits per illness- 25% of
                                                                                         MetLife - Met Protect       6,949/-                 Munich       -                till Lifetime
        number of days                ance ombudsman in case you are not satisfied                                                                                                                                                                                    Sum Insured. OT
                                                                                                                                             Easy Health
                                                                                                                                                                                                                                                                      Charges : Maximum lim-
                                      with the response of the insurance company.                                                            Individual -
        (5 days in case of                                                               Sir, I want to buy a health insurance policy        Standard                                                                                                                 its per illness- 50% of
                                                                                                                                             (Individual)                                                                                                             Sum Insured
        your policy) in the           Sir, I need to buy a term policy for myself.       for my parents for major critical illnesses
                                                                                                                                                            Co pay         No
                                      I am 30 year old and got married five              with a cover of Rs 3-5 lakh individually. My

                                                                                                                                                                                                                                                                                                      Source: Apnapaisa Research Bureau
        mediclaim policy.             months ago. My wife is earning 25000 per           mother's age is 55 years and my father is
                                                                                                                                                                           Applicable        IFFCO         Individual      3,990/-    70           Not covered        Room rent 1% of Sum
                                                                                                                                                            Sub Limits     No Limit          Tokio         Medishield                                                 Insured Per day
        This is to prevent            month which is enough for our monthly              60. Which plans should I go for?                                                                                                                                             I.C.U expenses :Room
                                      expense. I am earning 40000 per month. Our         In the insurance industry "Critical Illness" typ-                  PED Coverage After 3 con-
        fraud and enable                                                                                                                                                                                                                                              rent 2.5% of Sum Insured
                                      only liability is of Rs 6000 per month             ically means life threatening or incapacitat-                                   tinuous pol-
                                                                                                                                                                         icy years                                                                                    per day.

        cross verification,           towards car loan premium. Please tell me           ing diseases such as cancer, strokes, organ
                                                                                                                                                                                             Cholamand Individual          4,377/-    69           3 continuous       OT Charges: Maximum
                                      how much cover (sum insured) should I              failure, multiple sclerosis etc. I think what       PED - Pre Existing Disease   SI - Sum Insured
        if required.                  take. What should be kept in mind while            you meant was any illness serious enough to                                                         alam MS Health                                        policy year        limit per illness - 15% in
                                                                                                                                                                                             General                                                                  AC Single Room
                                      deciding the value of the cover?                   warrant hospitalisation. You should take an          (Harsh Roongta is CEO, Apnapaisa.com a         Insurance                                                                Upwards.
                                          Both you and your wife should ideally take     insurance cover for expenses from any hospi-               search comparison engine for loans,
                                      an insurance cover of 12 times your annual         talisation and not just from "critical illness".         insurance and investments. He can be       All policies come with cashless facility in the network hospital, specific to each company
                                      income. The sum insured for the policy which       All the health insurance plans will provide for     reached at moneymantra@apnapaisa.com)           * Premium is inclusive of service tax

           60   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                                1-15 April, 2011   MONEY MANTRA   61
EP-50-72akm.qxd   3/29/2011        2:02 PM        Page 14


                                                                             FINANCE BILL AND                                                   of commencement of operation in the
                                                                                                                                                case of two "specified businesses" of
                                                                                                                                                affordable housing projects and pro-
                                                                                                                                                                                             for a limited liability partnership as is
                                                                                                                                                                                             applicable to a partnership firm. It also
                                                                                                                                                                                             provides tax neutrality (subject to ful-
                                                                                                                                                                                                                                          information by it with India, as a noti-
                                                                                                                                                                                                                                          fied jurisdictional area;
                                                                                                                                                                                                                                          2) That if an assessee enters into a
                                                                                                                                                duction of fertilizer in a new plant or      fillment of certain conditions) to con-      transaction, where one of the parties

           REAL ESTATE SECTOR                           Bill, 2011 does not contain any neg-        incurred wholly and exclusively, for
                                                                                                                                                in a newly installed capacity in an
                                                                                                                                                existing plant shall be on or after April
                                                                                                                                                1, 2011. These amendments will take
                                                                                                                                                effect from April 1, 2012 and will,
                                                                                                                                                accordingly, apply in relation to the
                                                                                                                                                assessment year 2012-13 and subse-
                                                                                                                                                                                             version of private limited company or
                                                                                                                                                                                             an unlisted public company into an
                                                                                                                                                                                                  An LLP being treated as a firm for
                                                                                                                                                                                             taxation has the following tax advan-
                                                                                                                                                                                             tage over a company under the Income-
                                                                                                                                                                                                                                          to the transaction is a person located
                                                                                                                                                                                                                                          in a notified jurisdictional area, then
                                                                                                                                                                                                                                          all the parties to the transaction shall
                                                                                                                                                                                                                                          be deemed to be associated enterpris-
                                                                                                                                                                                                                                          es and the transaction shall be deemed
                                                                                                                                                                                                                                          to be an international transaction and
                                                        ative proposal to the continuance of        the purpose of the "specified busi-         quent years.                                 tax Act:-                                    accordingly, transfer pricing regula-
                                                        this deduction even in the financial        ness". Currently, the following spec-            Under section 73A, any loss of a        i) it is not subject to Minimum              tions shall apply to such transactions.
                                                        year 2011-12. An individual as also         ified businesses are eligible for avail-    "specified business" (under section          Alternate Tax;                               3) That no deduction in respect of any
                                                        Hindu Undivided Family would con-           ing investment-linked deduction             35AD) is allowed set-off against prof-       ii) it is not subject to Dividend            payment made to any financial insti-
                                                        tinue to enjoy the benefit of deduc-        under section 35AD:-                        it and gains of any other "specified         Distribution Tax (DDT); and                  tution shall be allowed unless the
                                                        tion on account of interest on loan to      (i) Setting up and operating a cold         business". In order to remove any            iii) it is not subject to surcharge.         assessee furnishes an authorisation, in
                                                        the extent of Rs 1,50,000. This system          chain facility.                         ambiguity in this regard in respect of            In order to preserve the tax base       the prescribed form, authorising the
                                                        of continuance of the tax deduction         (ii) Setting up and operating a ware-       the business of hotels and hospitals, it     vis-à-vis profit-linked deduction, the       Board or any other income-tax author-
                                                        in respect of interest on loan would        housing facility for storage of agricul-    is proposed to remove the word "new"         Finance Bill, 2011 has proposed to           ity acting on its behalf, to seek rele-
                Subhash Lakhotia                        result into continuance of tax saving       ture produce.                               from the definition of "specified busi-      insert a new Chapter XII-BA in the           vant information from the said finan-
                                                        to the tune of maximum Rs 45,000            (iii) Laying and operating a cross-         ness" in the case of hotels and hospi-       Income-tax Act containing special pro-       cial institution.
                    he Finance Bill, 2011 con-          for such individuals. It also, therefore,         country natural gas or crude or       tals under section 35AD(8). With this,       visions relating to certain limited lia-     4) That no deduction in respect of any

           T        tains certain proposals which
                    are directly going to affect
                    the real estate in the coun-
           try. Some of the proposals are good
           while some other proposals are not.
                                                        makes it a point to buy property joint-
                                                        ly so that the joint co-owners enjoy
                                                        this deduction individually.
                                                            Similarly, the deduction with ref-
                                                        erence to rental income continues to
                                                                                                          petroleum oil pipeline network
                                                                                                          for distribution, including storage
                                                                                                          facilities being an integral part
                                                                                                          of such network.
                                                                                                    (iv) Building and operating, any-
                                                                                                                                                the loss of an assessee on account of
                                                                                                                                                a "specified business" claiming deduc-
                                                                                                                                                tion under section 35AD would be
                                                                                                                                                allowed to be set off against the prof-
                                                                                                                                                it of another "specified business" under
                                                                                                                                                                                             bility partnerships. Under the proposed
                                                                                                                                                                                             amendment, where the regular income-
                                                                                                                                                                                             tax payable for a previous year by a
                                                                                                                                                                                             limited liability partnership is less than
                                                                                                                                                                                             the alternate minimum tax payable for
                                                                                                                                                                                                                                          other expenditure or allowance
                                                                                                                                                                                                                                          (including depreciation) arising from
                                                                                                                                                                                                                                          the transaction with a person located
                                                                                                                                                                                                                                          in a notified jurisdictional area shall
                                                                                                                                                                                                                                          be allowed under any provision of the
           However, the fact remains that contin-       be @ 30% of the rental income.                    where in India, a new hotel of        section 73A, whether or not the latter       such previous year, the adjusted total       Act unless the assessee maintains such
           uance of good tax provisions exist-          However, it may be noted that as per              two-star or above category as         is eligible for deduction under section      income shall be deemed to be the total       other documents and furnishes the
           ing as on today is itself a big bonan-       the proposed Direct Tax Code, the                 classified by the Central             35AD. Therefore, an assessee who cur-        income of such limited partnership and       information as may be prescribed.
           za for all those who are directly or         deduction for the rental income is sup-           Government.                           rently operates a hospital or a hotel        it shall be a liability to pay income-tax    5) That if any sum is received from a
           indirectly connected with the real           posed to be restricted to 20% only. It      (v) Building and operating, anywhere        would be able to set off the profit of       on such total income at the rate of eight-   person located in the notified jurisdic-
           estate sector.                               is also expected that due to the con-            in India, a new hospital with at       such business against the losses, if any,    een and one-half per cent.                   tional area, then, the onus is on the
                                                        tinuance of 30% deduction from the               least one hundred beds for             of a new hospital or new hotel which              All those persons who are in the        assessee to satisfactorily explain the
           Continuance of existing                      rental income may be even after the              patients;                              begins to operate after April 1, 2010        real estate sector should now be very        source of such money in the hands of
           provisions                                   enactment of the DTC, this deduc-           (vi) Developing and building a hous-        and which is eligible for deduction of       careful in entering into transaction with    such person or in the hands of the ben-
               In the first place, one of the most      tion may continue up to 30% itself.               ing project under a scheme for        expenditure under section 35AD. This         person located in notified jurisdiction-     eficial owner, and in case of his fail-
           important points as discussed by the         Even under the wealth tax law, there              slum redevelopment or rehabili-       amendment will take effect retrospec-        al area. This is a new terminology as        ure to do so, the amount shall be
           Finance Minister in his budget speech        is no change with regard to exemption             tation framed by the Central          tively from April 1, 2011, according-        proposed in the Finance Bill, 2011. The      deemed to be the income of the
           relates to the continuance of the            in respect of one property or a plot of           Government or a State                 ly, and apply in relation to the assess-     purpose of identifying notified jurisdic-    assessee;
           scheme of granting interest subsidy on       500 sq yd. Hence, the continuance of              Government, as the case may be,       ment year 2011-12 and subsequent             tional area is to discourage transactions    6) That any payment made to a per-
           housing loan. The interest subsidy of        existing wealth tax deductions relat-             and notified by the Board in this     years.                                       in India by all those persons who are        son located in the notified jurisdic-
           1 per cent would continue on hous-           ing to property is very good and                  behalf in accordance with the                                                      located in any country or jurisdiction-      tional area shall be liable to deduc-
           ing loan up to Rs 15 lakh and would          should be welcomed.                               guidelines as may be prescribed.      What about LLP?                              al area which does not effectively           tion of tax at the higher rates speci-
           be granted to persons who buy prop-                                                                                                       The large amount of spending in         exchange information with India.             fied in the relevant provision of the
           erties worth Rs 25 lakhs. As a result        Subsidy to developers                       The New Addition                            different avenues for the development        Hence, the introduction of new tax           Act or rate or rates in force or a rate
           of continuance of an interest subven-             Indirectly, as a result of amend-      It is proposed to include two new busi-     of infrastructure in the country will def-   amendments to this effect are as a sort      of 30 per cent.
           tion for home buyers, it is expected         ment to section 35AD, the govern-           nesses as "specified business", i.e.,-      initely help the booming real estate sec-    of anti-avoidance measures adopted by             This amendment is proposed to
           that the real estate sector will have a      ment has proposed to provide sub-           (a) developing and building a housing       tor. Some of the persons engaged in the      the government through the Finance           take effect from June 1, 2011.
           good time even during the financial          sidy to all those persons engaged in the    project under a scheme for affordable       real estate sector business might have       Bill, 2011. A new section 94A is pro-             The overall impact, the author
           year 2011-12.                                real estate sector and especially to all    housing framed by the Central               created the instrument of limited liabil-    posed to be inserted in the Income-          feels, on the real estate sector as a
               As mentioned above, the contin-          those developers who are engaged in         Government or a State Government,           ity partnership. The fact remains that       tax Act so as to provide specific pro-       result of Budget proposals as con-
           uance of some of the existing provi-         the activity of construction of residen-    as the case may be, and notified by         the limited liability partnership form of    visions for transactions entered into by     tained in the Finance Bill, 2011 would
           sions for the benefit of the real estate     tial housing and apartments. Under the      the Board in this behalf in accordance      carrying on business is very good tool       the tax payer of India with a person         not have any adverse impact and it is
           sector will help the industry to a great     existing provisions of section 35AD         with the guidelines as may be pre-          from the overall perspective.                located in notified jurisdictional area      expected that the real estate sector will
           extent. For example, one of the most         of the Income Tax Act, investment-          scribed; and                                     The Limited Liability Partnership       in different parts of the world. The         continue to do well during the com-
           important tax saving instrument for          linked tax incentive is provided by         (b) production of fertilizer in India       Act, 2008 (LLP) came into effect in          proposed section provides-                   ing period.
           home buyers relates to deduction to          way of allowing 100 per cent deduc-               The dates of commencement of          2009. The LLP has features of both a         1) An enabling power to the Central
                                                                                                                                                                                                                                           (The author is tax & investment consultant
           the tune of Rs 1,50,000 on account           tion in respect of any expenditure of       the "specified business" as an eligibil-    body corporate as well as a tradition-       Government to notify any country or            at New Delhi for last over 40 years. He is
           of interest on housing loan. The budg-       capital nature (other than on land,         ity condition are detailed in section       al partnership. The Income-tax Act           territory outside India, having regard             also Director of M/s R.N. Lakhotia &
           et proposal as contained in the Finance      goodwill and financial instrument)          35AD(5). It is proposed that the date       provides for the same taxation regime        to the lack of effective exchange of                  Associates & The Strategy Group)

           62   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                     1-15 April, 2011   MONEY MANTRA   63
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           TAX MATTERS

           DOCUMENT IDENTIFICATION                                                                                                            income-tax authority or on behalf of
                                                                                                                                              such authority does not bear
                                                                                                                                              Document Identification Number,
                                                                                                                                              such document, letter or any corre-
                                                                                                                                                                                        Yes that's right - the law said that if the
                                                                                                                                                                                        document filed did not carry DIN it
                                                                                                                                                                                        ceased to exist in the eyes of law. Now,
                                                                                                                                                                                        DIN was not supposed to be a one-
                                                                                                                                                                                                                                      involved in these proceedings.
                                                                                                                                                                                                                                          Two, implementation of such a
                                                                                                                                                                                                                                      provision would have required end-
                                                                                                                                                                                                                                      to-end computerisation of the entire

           NUMBER - JUNKED                                                                                                                    spondence shall be treated as invalid
                                                                                                                                              and shall be deemed never to have
                                                                                                                                              been received.
                                                                                                                                                  This amendment will take effect
                                                                                                                                              from October 1, 2010."
                                                                                                                                                                                        time assessee-specific affair as the
                                                                                                                                                                                        PAN (Permanent Account Number) or
                                                                                                                                                                                        TAN (Tax deduction Account
                                                                                                                                                                                        Number) are. Instead, it was supposed
                                                                                                                                                                                        to be a document specific number. In
                                                                                                                                                                                                                                      Income Tax department and a com-
                                                                                                                                                                                                                                      plete shift to a paper-less office.
                                                                                                                                                                                                                                      Actually, the department will be
                                                                                                                                                                                                                                      nowhere near that goal for next sev-
                                                                                                                                                                                                                                      eral years. The critical IT infrastruc-
                                                        retrospectively from 1st April, 2011."     to Finance (No.2) Bill 2009 make                                                     other words every document whether            ture and other paraphernalia required
                                                             Alert readers may recall that         interesting reading -                      Introduced in a hurry?                    issued by any authority in the Income         for implementation of such a change
                                                        Section 282B was introduced in the              Introduction of Document                  The objectives of improving stan-     Tax Department or filed by a taxpay-          across the department and the wider
                                                        Income Tax Act by the Finance (No.2)       Identification Number and facility for     dards of taxpayer service and trans-      er before any authority in the Income         world of three crore taxpayers, tax
                                                        Act 2009 requiring all documents           electronic communication                   parency, for which the Section 282B       Tax Department, was expected to               deductors and tax practitioners etc
                                                        received by the Income Tax depart-              It is now well accepted that "tax     was avowedly brought in, are lofty        carry a unique DIN by which that doc-         simply does not exist. That the same
                                                        ment or issued by it, to carry a unique    administration is tax policy". A tax       ideals to which department presum-        ument was to be identified and treat-         could also not be created in the two
                                                        identification      number        called   administration designed to foster vol-     ably still remains committed. And yet     ed valid. In practical terms it meant         year period between July 2009 and
                                                        Document Identification Number or          untarily compliance yields higher rev-     the budget documents 2011 give no         that if you or your employee went to          July 2011 is ample evidence that the
                                                        DIN. This was meant to "improve            enue than a sound tax policy admin-        reason as to why a provision brought      an Income tax Office to file a paper          legislative change was introduced in
                                                        service standards of Income Tax            istered by an inefficient tax adminis-     to implement these eminently desir-       which you are by law required to file         2009 without making the necessary
                SS Khan                                 department and bring transparency in       tration. Therefore, it has always been     able objectives has been unceremo-        there - say, a simple request for             preparation at the ground level, and
                                                        its functioning". This Section provid-     the endeavour of the Income-tax            niously junked without so much as         adjournment or a return of income or          without understanding its ramifica-
                       ow that the din over Budget      ed that -                                  Department to improve the standards        even a trial implementation. After all,   reply to a show cause notice for penal-       tions.

           N           2011 and the myriad analy-
                       ses of its macro and micro
                       numbers is subsiding, per-
           haps it is time to look at some of the
           hidden gems and devils in the fine
                                                        (1) Every income-tax authority shall
                                                        allot a computer generated Document
                                                        Identification Number in respect of
                                                        every notice, order, letter or any cor-
                                                        respondence issued by him to any
                                                                                                   of its service and transparency in its
                                                                                                   functioning. Therefore, it is proposed
                                                                                                   to introduce a computer based sys-
                                                                                                   tem of allotment and quoting of
                                                                                                   Document Identification Number
                                                                                                                                              the change was introduced by this very
                                                                                                                                              Government by the Finance (No.2)
                                                                                                                                              Act 2009. It is not as if a new
                                                                                                                                              Government has come which does not
                                                                                                                                              happen to agree with the views of its
                                                                                                                                                                                        ty or an appeal memo etc (which are
                                                                                                                                                                                        generally required to be filed by a due
                                                                                                                                                                                        date), and the clerk at the Receipt
                                                                                                                                                                                        counter did not give you a receipt
                                                                                                                                                                                        because the computer system was
                                                                                                                                                                                                                                      Time for some soul
                                                                                                                                                                                                                                          The original Section 282 was
                                                                                                                                                                                                                                      supposed to come into force with
           print of the documents tabled in             other income-tax authority or assessee     (DIN) in each correspondence sent          predecessor on some policy matter.        down or gave a receipt which did not          effect from October 1, 2010. The
           Parliament with the Budget speech.           or any other person and such number        or received by it so as to enable track-       Actually, underlying the unstated     carry the so-called computer-gener-           date of implementation was extend-
           One of the gems quietly tucked is in         shall be quoted thereon.                   ing of documents and minimise tax-         reason behind the introduction of this    ated DIN, or which carried some num-          ed by the Finance Act 2010 to July
           Clause 30 of the Finance Bill 2011.          (2) Where the notice, order, letter or     payers' grievances.                        provision and its rather unceremoni-      ber which the department does not             1, 2011. And now Finance Bill 2011
           This simply reads "Section 282B of           any correspondence, issued by any               With a view to giving effect to the   ous deletion is the unsavoury prac-       recognise as DIN, then you will be            has junked the entire section alto-
           Income Tax Act shall be omitted. On          income-tax authority, does not bear a      aforesaid section, it is proposed to       tice of making important changes in       deemed to have never filed that doc-          gether. The fact that the date of
           the surface this appears to be an            Document Identification Number             insert a new section 282B so as to         fiscal legislation through the annual     ument. And naturally, all the statuto-        implementation was postponed by
           innocuous, in fact a rather coy, state-      referred to in sub-section (1), such       provide that every income tax author-      Finance Bills. This is generally done     ry consequences of not filing that doc-       the Finance Act 2010 would indicate
           ment hardly meriting a second look           notice, order, letter or any correspon-    ity shall allot a computer generated       to bypass prior public discussion on      ument will follow from this. No               that the Department was well aware
           leave alone discussion.                      dence shall be treated as invalid and      Document Identification Number in          such proposals by taking advantage of     appeals and no mercy petitions pro-           of the multiple problems involved
                                                        shall be deemed never to have been         respect of every notice, order, letter     the secrecy involved in the budget-       vided for the taxpayer - for this lapse       in implementing this provision.
           Doing away with DIN                          issued.                                    or any correspondence issued by him        ary exercise.                             on the part of the department! Surely         Therefore, the question remains that
               The following explanation in the         (3) Every document, letter or any cor-     to any other income-tax authority or                                                 this would have given a big handle            why put provisions in the Act, which
           "Notes on Clauses" also does not offer       respondence, received by an income-        assessee or any other person and such      Creating insurmountable                   to the functionaries manning the              you know that you cannot imple-
           much by way of an explanation for the        tax authority or on behalf of such         number shall be quoted thereon.            troubles                                  Receipt Counters in the Tax depart-           ment?
           above amendment -                            authority, shall be accepted only after         It is further proposed that where          Although the basic idea behind the   ment.                                             One should be happy and grate-
               "Clause 30 of the Bill seeks to          allotting and quoting of a computer        the notice, order, letter or any corre-    late lamented Section 282B was laud-          Similarly, if a departmental func-        ful to the Finance Minister that such
           omit section 282B of the Income-tax          generated Document Identification          spondence issued by any income-tax         able, there were two critical and         tionary issued a letter or notice or          a taxpayer- unfriendly measure and
           Act relating to allotment of Document        Number.                                    authority does not bear a Document         known problems with this provision        summon or an assessment order etc to          one fraught with such large scale pos-
           Identification Number. Under the             (4) Where the document, letter or any      Identification Number, such notice,        even when it was introduced. In the       a taxpayer or to anyone else without          sibilities of mischief and harassment
           existing provisions contained in the         correspondence received by any             order, letter or any correspondence        end these have proved fatal.              the DIN, then as per Section 282(2)           has been given a quite burial. But what
           said section 282B, every income-tax          income-tax authority or on behalf of       shall be treated as invalid and shall           One, the Section was so widely       it would be deemed to have never              should still worry policymakers is that
           authority shall, on or after the 1st day     such authority does not bear the           be deemed never to have been issued.       worded as to create insurmountable        been issued - again with all the legal        how such half-baked changes find
           of July, 2011, allot a computer gen-         Document Identification Number             It is also proposed to provide that        problems for taxpayers, and tax prac-     consequences of not issuing such a            their way into the budgetary propos-
           erated Document Identification               referred to in subsection (3), such doc-   every document, letter or any corre-       titioners as well as for the departmen-   notice or order etc. With the stan-           als and in the Finance Bills with such
           Number in respect of every notice,           ument, letter or any correspondence        spondence, received by an income-tax       tal functionaries. As per its sub-sec-    dards of accountability in                    ease and nonchalance. That such pro-
           order, letter or any correspondence          shall be treated as invalid and shall      authority or on behalf of such author-     tion(4) if a document, letter or any      Government departments being                  posals can routinely pass Parliamentary
           issued by him to any other income-tax        be deemed never to have been               ity, shall be accepted only after allot-   other correspondence filed by any per-    what they are, all it would have taken        muster without any discussion should
           authority or assessee or any other per-      received."                                 ting and quoting of a computer gen-        son with any Income Tax authority         an unscrupulous person to get an              also be a matter of concern.
           son and such number shall be quoted                                                     erated Document Identification             does not bear the Document                entire assessment/ penalty proceed-
           thereon. It is proposed to omit the          Need for DIN then                          Number. It is also proposed to provide     Identification Number the document        ing invalidated was to not mention            The writer has served as Member,
                                                                                                                                                                                                                                      Central Board of Direct Taxes,
           aforesaid section.                               The reasons then given to              that where the document, letter or any     shall be treated as invalid and shall     DIN on just one notice/ order etc in          Government of India. He is winner of PM’s
               This amendment will take effect          Parliament in the "Notes on Clauses"       correspondence received by any             be deemed to have never been filed.       the entire chain of documentation             Award for Excellence in Public administration.

           64   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                  1-15 April, 2011   MONEY MANTRA   65
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                                                                                                                                                                                                                                              STATE FACTS TO
                                                                DON’T COVER UP TO                                                                                                                                                              GET IT RIGHT
                                                                                                                                                                                                                                         While getting an insurance cover,
                                                                                                                                                                                                                                       one should not hide any information
                                                                                                                                                                                                                                      from the insurance compamy. It may

           GET A COVER
                                                                                                                                                                                                                                         result in denial of claim in case of
                                                                                                                                                                                                                                          The practice of signing insurance
                                                                                                                                                                                                                                        form without filling it up may catch.
                                                                                                                                                                                                                                                       the insured off gaurd
                                                                                                                                                                                                                                           It's beneficial to cross check the
                                                                                                                                                                                                                                          content of the form, if it has been
                                                        It is important for                        ing the form and whether he had real-                                                                                                                   filled by the agent.

                                                        insurers to reveal all the                 ly lied or whether the agent had filled                                                                                                     As per insurance regualtion,
                                                                                                   it up himself without even checking                                                                                                      insurers should also reveal the
                                                        terms and conditions of                    with the insured and got his signature.                                                                                             details of the policy in minute detail.
                                                        the policy and not hide                    Considering how policies are filled up                                                                                                  Courts have held that where an
                                                                                                   in our country, the latter could well                                                                                                     insurer repudiates a claim on
                                                        any information                            be the case. Whatever was the truth,                                                                                                 grounds of suppression of facts by
                                                                                                                                                                                                                                      the insured, the insurer has to prove
                                                        pertaining to the policy                   the fact remained that the insured had
                                                                                                                                                                                                                                                 that the policy holder had
                                                                                                   signed on the paper , thereby validat-                                                                                                          deliberately suppressed
                                                        or its terms and                           ing whatever was written there. And                                                                                                                          information.
                Pushpa Girimaji                         conditions. The insurer                    the insurance company pointed to this
                                                                                                   and said the insured had lied. So on the
                 do not know how many insurance         or its agent or any                        ground that the insured had supressed

            I    policyholders have heard of the
                 Latin phrase "Uberrima Fides",
           meaning utmost good faith. Used usu-
                                                        intermediary shall act
                                                        according to the code of
                                                                                                   vital information about his being an
                                                                                                   alcoholic, the insurance company
                                                                                                   repudiated the claim of the widow.
           ally in insurance contracts, in simple       conduct prescribed                              The District Forum before which         the question on whether he drank alco-      contract- to reveal all the terms and     intermediary shall act according to
           terms what it means is that both the                                                    the widow filed a complaint, held that       hol. However, the doctor's certificate      conditions of the policy and not hide     the code of conduct prescribed for
           parties to the contract, that is the         for them.                                  at the time of buying the insurance          from JSS hospital indicated that the        any information pertaining to the pol-    them.
           insured and the insurer (insurance                                                      policy, Mr Raju was not suffering            patient had been an alcoholic for the       icy or its terms and conditions. In
           company) should display abundant                                                        from any disease and was healthy. And        past nine years and that alcohol con-       fact, if you see the Insurance            Prove to deny claim
           good faith and reveal all facts relevant     Redressal Commission on Feburary 4,        the insurer had not been able to pro-        sumption had contributed to the dis-        Regulatory and Development                    Similarly, I must also point out
           to the contract and not hide or suppress     2011. Here, Mr Sidda Raju had taken        duce any documents or evidence to            ease which caused his death (The order      Authority (Protection of Policy           that courts have held that where an
           any information. This is particularly        an insurance policy under the Single       contradict this. It therefore directed the   does not mention what that disease was      Holders' Interests) Regulations, it       insurer repudiates a claim on
           applicable to the person buying the          Life Endowment Plan with effect            insurer to pay the insured amount along      ). It was thus clear that the insured had   clearly states that "a prospectus of      grounds of suppression of material
           policy as he or she is supposed to be        from June 2003, for a period of 15         with interest. The State Commission,         suppressed the information regarding        any insurance product shall clearly       facts by the insured, the insurer has
           truthful while filling up an insurance       years. The sum assured under the pol-      before which the insurance company           his intake of alcohol and thereby the       state the scope of benefits, the extent   to prove that (a) the policyholder had
           form. Failure on this count could well       icy was Rs 60,000, which included          filed an appeal, dismissed it and upheld     vital facts pertaining to his health and    of insurance cover and in an explic-      deliberately suppressed certain
           jeopardise the claim on the insurance        an accident insurance of an equivalent     the verdict of the District forum. While     habits. Since an insurance policy is a      it manner explain the warranties,         information known to him or her (b)
           policy .                                     amount, totaling Rs 1.2 lakhs. Just        doing so, it pointed out that the insur-     contract of utmost good faith, any vio-     exceptions and conditions of the          that the information so suppressed
                                                        seven months after taking the policy,      ance company had relied on the dis-          lation of its terms and conditions by the   insurance cover and, in case of life      was of significance in so far as the
           Fill insurance form                          the insured died.                          charge certificate issued by JSS             insured entitles the insurer to repudiate   insurance, whether the product is         policy was concerned and (c) by
           yourself                                          Usually, insurance companies are      Hospital, Mysore to show that the life       the claim.. The insurance company was       participating (with-profits) or non-      such suppression, the insured hope
               Most consumers are unaware of            most suspicious of early claims and        insured had taken treatment in               therefore justified in rejecting the        participating (without-profits)…"         to gain some advantage. The courts
           this and as a result often allow the per-    in this case they investigated into the    St.John's Hospital, Bangalore during         claim, the Commission held. (HDFC                It also says that where, for any     have also made it clear that the bur-
           son selling the policy to fill up the        medical history of the insured and         May, 2003, but had not produced any          Standard Life Insurance Company Vs          reason, the proposal and other con-       den of proving all this is on the insur-
           form and do not even cross-check the         came up with a doctor's certificate        person from that hospital nor filed          Smt Jayalaxmi, RP No 336 of 2007,           nected papers are not filled by the       ance company making the allega-
           facts to see whether the information         from JSS Hospital which said that          any affidavit from any person from that      decided on Feb 4, 2011)                     prospect or the person buying the         tion.
           provided is factually correct. There are     the patient was an alcoholic for the       hospital. In the absence of this, the              I quote this case to underscore the   policy, a certificate may be incor-            So there are enough measures in
           also cases of consumers just signing         previous nine years and it was this that   State Commission said it saw no rea-         need for consumers to fill the insurance    porated at the end of the proposal        the form of laws, regulations and
           the blank form and asking the agent          contributed to the disease which even-     son to interfere with the order of           forms themselves. Or if someone helps       form, signed by the prospect say-         court orders, to protect consumer
           to fill it up later. Such practice could     tually resulted in his death.              the District Forum.                          them fill it, read it carefully and make    ing that the contents of the form and     interest. However, (a) consumers
           well harm the interests of the con-                                                          The National Consumer Disputes          sure that the facts mentioned are accu-     documents have been fully                 must be aware of them and (b)
           sumer and even defeat the very pur-          It costed him heavily                      Redressal Commision, before which            rate, before putting their signature.       explained to him and that he has          should take all steps necessary to pro-
           pose of taking an insurance policy, if           In the policy document, to the         the insurer filed a revision petition,                                                   fully understood the significance of      tect their interests. One of them is
           the information given by the interme-        question on "Do you drink alcohol?",       however held a different view. It            Insurers can’t hide                         the proposed contract. The                to ensure that the information provid-
           diary is false or incorrect.                 the insured had said "No". Now we do       opined that from the two documents               Having said that, I must also           Regulation also makes it clear that       ed in a policy form is accurate.
               Take this case decided by the            not know whether this question was         before it, it was apparent that the          emphasise that it is equally important      during the process of sale of the pol-      (The writer is a columnist on consumer
           National        Consumer       Disputes      put to the insured at the time of fill-    insured had replied in the negative to       for insurers to fulfill their part of the   icy, the insurer or its agent or any                                   right issues.)
           66   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                 1-15 April, 2011   MONEY MANTRA   67
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           Investment Clinic

                                Setting goals: Do not forget                                                                                                Plan well in advance for
                                to plan for emergencies                                                                                                     chindren’s education
                                I am Siksha, 30, working in an educational                                                                       Krishnamurthy & Shanti, both working pro-             Estimation of College Fee Structure
                                                                                                        Key Features
                                institute and my better half Sudhir, 33, works        Net Income                  80000 per month.           fessionals, have a son Anirudh aged 5 years and        Particulars                  Fees for the year
                                in an automobile company. We have a son                                                                      a daughter Prerana, aged 3 years. They wish                                         2011 (Rs.)
                                Mayank, 4, who recently started going to a                            Monthly Expenses                       to plan for their children education up to post        11th Standard (including 220000
                                premier school. Our net take home salary is           Household Expenses 50000                               graduate education. Since both of them have            cost of special
                                Rs. 80,000 per month. We live in my in-laws'          PPF                         5834 (70000/12)            done well academically, they feel that their chil-     coaching):
                                house and don't pay any rent. Ours is a joint                                                                dren also would follow their suit. They                12th Standard (including 220000
                                                                                      Insurance Policy            5000                                                                              cost of special
                                family and the household expenses are around                                                                 approached us for financial planning related
                                                                                                                  {(50000+10000)/12}                                                                coaching):
                                50000 per month. We are having around Rs.                                                                    to their children's educational expenses which
                                2 lakhs in savings account.                           Proposed Term Plan 1100                                include four years of under graduate and 2 or          PG                       Fee Structure
                                We deposit Rs. 70,000 annually in PPF                 for Rs. 1 Crores                                       3 years of post graduate education in India.           Pre-Clinical             62700
                                (depositing since 2 years) and have taken a                                                                      Case Analysis                                      Para Clinical            125400
                                                                                      Proposed Medical            416
                                child plan scheme whose premium is Rs.                                                                           The process of planning for children edu-          Clinical                 501600

    “                                                                                                                                                                                                                                                                       “
                                                                                      Cover of 3 lakh
                                50,000 per annum. We spent Rs. 1 lakh in the                                                                 cation begins with identification of the type          UG                       Fee Structure
                                admission of our child. Besides, Rs. 50,000 per       Total                       Rs. 62350                  (professional/non-professional) and duration           Medical                  357500
    On average a 12%
    annual return on
                                annum goes to LIC and premium of Rs.                  Monthly Surplus             Rs. 17650 (80000-
                                                                                                                                             of education (up to graduation or including            Dental                   253000                                    It is advised that
                                10,000 goes to a money back policy.                                                                          post-graduation). When the children are young          Engineering              137500
    MF is expected.
                                                                                                                                             (as in this case), it is very difficult to say with                                                                       suitable risk
                                                                                                                                                                                                    MBA                      Fee Structure
    Shiksha will be able        Financial Goals
                                                                                                     Goal Now & Then
                                                                                                                                             any certainty the stream of education they
                                                                                                                                                                                                    MBA- Year 1              500000                                    covers on the life
                                     We want to buy a house of Rs. 80 lakh in the                                                            would choose when they grow up. All the
    to create a kitty of            NCR region by taking a loan of Rs. 50 lakhs.      Present Value               Future Value               same, parents have to be ready with options.           MBA- Year 2              600000                                    of parents be
                                    We need to buy a car worth Rs. 8 lakhs, as soon                                                          It would be impossible to plan for an educa-           These costs do not include any other expenses
    Rs 10 lakh for                                                                    1) House in NCR: Rs. 80 Out of reach, goal                                                                    related to education                                               obtained to
                                    as possible.                                                                                             tion which is entirely self-funded unless and
    funding her child’s              We are planning to go abroad in our vaca-
                                                                                      Lakhs                   needs to be revised.                                                                                                                                     ensure that
    study in the year               tions which will take another Rs. 1 lakh.         2) House in NCR: Rs. 30 Rs. 40 Lakhs as on 01-            Returns, inflation and Income Tax Rate Assumption                                                                      planned goals
    2016.                       Kindly Consider
                                                                                      Lakhs                   08-2015.                       We have assumed that the inflation will be at the level of 10% and income tax rate at 30.1% and return
                                                                                                                                             at 12% (8% during the first two years of transition phase, 4.14% during the last two years of transition                  are met in
                                                                                      3) Car Rs. 8.0 Lakhs        Rs. 9.06 Lakhs as on 01-
                                     I expect me and my husband's salary to                                                                  phase and also during the period of college education). Based on the above assumptions, we have                           unfortunate
                                                                                                                  09-2013 (cost increas-
                                    increase by minimum 10-15% from next                                                                     indicated the investments required to meet the educational goals up to Post Graduation level.
                                                                                                                  ing @ 6% considered).
                                    month. Please suggest a financial roadmap for
                                                                                                                                                               Education Corpus Required at the beginning of the academics
                                                                                                                                                                                                                                                                       event of demise
                                    us.                                               4) Vacations                Rs. 1.0 Lakhs Rs. 1                                                                                                                                  of one or both
                                                                                                                                              Particulars              Anirudh                            Prerana                     Total
                                Solution                                                                          Lakhs as on 01-07-2011.

                                Siksha lacks for resources in case of emergen-                                                                Medicine                 1,25,46,167                 1,51,80,862                 2,77,27,028                             parents.
                                                                                        Home loan interest rate @ 10% per annum.              Engineering                 76,87,415                76,87,415                   1,53,74,830
                                cies. Hence her prior need should be to create a
                                contingency fund. Also the family should have         Recommendations                                                       Annual Level of Investment required to establish the above corpus
                                a term insurance cover for the same purpose.
                                                                                        Present 2.0 lakhs should be transferred to short      Medicine                 6,65,367                       5,95,423                 12,60,789
                                Seeing her situation a term plan of Rs 1 crore
                                                                                        term income/liquid/Super Saving type of
                                would be enough. I am also advising for a med-                                                                Engineering              4,07,690                       3,01,515                 7,09,206
                                                                                        account and should be kept aside for emer-
                                ical cover for family worth 3 lakhs. The couple
                                                                                        gency fund only (equivalent to expense of 3          until the parents would become rich and would          There is a possibility of earning higher returns
                                is expecting increase in income, next month @
                                                                                        Months).                                             have enough wealth. This method would                  and thereby reducing the annual level invest-
                                12% (suppose), this means an increase of 9600
                                                                                        Since the couple has a maximum surplus of Rs.        assume, therefore, that the ward would perform         ment required. This would also increase the
                                (12% of 80000). Also for achieving goal they are
                                                                                        32250 per month, they are eligible for maxi-         academically well and would be eligible to             investment risk. It is advised that suitable risk
                                required to deploy their PPF savings in other
                                                                                        mum loan amount of Rs. 30 lakhs and 25%              receive government subsidized education                covers on the life of parents be obtained to
                                avenue being suggested. Hence,
                                                                                        should be their own investment. Hence they           (partly/fully). Even this type of education costs      ensure that planned goals are met in the unfor-
                                    Total Monthly Surplus = Rs. 32250                   have to compromise their flat to one which           much compared to the incomes of average mid-           tunate event of demise of one or both parents.
                                    (17650+9600+5000)                                   is having a present value of Rs. 30 lakhs. The       dle class Indian household. Therefore, it is           Each parent also has to put in place a will to
                                                                                        home with present value 80 lakhs now, is not         important to plan early.                               ensure that the guardians are identified who
                                Assumptions                                             achievable.                                              Other Planning considerations                      will take care of the assets and needs of the chil-
                                    Rs. 1.40 lakhs of PPF taken into account for        Since they are already residing in their in-laws'        The above scenario assumes a determin-             dren in case of any unforeseen circumstances.
                                    accumulation of Rs. 10 lakhs for upfront home       house, I have kept this goal as last priority.       istic model. Various scenarios can be created
                                    loan.                                                                                                    by changing the parameter values. Due to lack          NarendraN Kondajji is the Promoter and Director of
                                    Savings Rate @ 9% per annum.                      Anil Kaul is the Charted Financial Planner with
                                                                                                                                             of space the same are not presented here. Also,        Procyon Financial Planners Pvt Ltd, a financial planning
                                    Inflation Rate @ 6% per annum.                    sahayak.com. He can be reached at                      we have assumed a conservative returns                 services providing company. He can be reached at
                                    Real Estate inflation @ 7% per annum.             welcome@sahayak.com                                    assumption during the accumulation phase.              knnarendra@procyonfp.com

           68   MONEY MANTRA   1-15 April, 2011                                                                                                                                                                                                     1-15 April, 2011   MONEY MANTRA   69
EP-50-72akm.qxd   3/29/2011        2:02 PM        Page 22

           70   MONEY MANTRA   1-15 April, 2011             1-15 April, 2011   MONEY MANTRA   71
EP-50-72akm.qxd      3/29/2011          2:02 PM          Page 24

                                                          Portfolio Tracker

                       Rajen Shah's portfolio                                                             Arun Kejriwal's portfolio
           Stock                     Weightage Previous Price Current Price          Change    Stock                      Weightage Previous Price Cureent Price Change
                                                (As on 31/12/2010) (As on 24/03/2011) (in %)                                        (As on 31/12/2010) (As on 24/03/2011) (in %)
           Godrej Ind.          15%             191.55           176.3               -7.96     Aries Agro                 38%         139.3            116.55             -16.33
           BEML                 10%             1,033.05         686.75              -33.5     Ruchira Papers             35%         22.15            11.75              -46.95
           AB Nuvo              10%             838.95           782.05              -6.78     LIC Housing F              27%         195.55           197.7              -1.1
           Indian Hotels        5%              96.6             81.1                -16.04
                                                                                               Value of Investment                    5,00,000         388287.1           -22.34
           India Cements        10%             107.65           93.35               -13.28
           JK Tyre              10%             134.85           91.3                -32.29
           Mahindra Ugine       10%             64.75            52.75               -18.53
           Tata Global Beverage 10%             108.35           99.05               -8.58
           United Phosphorus 10%                173.15           141.2               -18.45               Madhumita Ghosh's portfolio
           Shanthi Gears        5%              44.8             35.55               -20.64
           Finolex Cables       5%              53.5             47.15               -11.87    Stock                   Weightage Previous Price        Current Price      Change
                                                                                                                                     (As on 31/12/2010) (As on 24/03/2011) (in %)
           Value of Investment                  5,00,000         416162.6            -16.77
                                                                                               GAIL                    15%           510.8             459.35             -10.07
                                                                                               Biocon                  15%           421.75            334.1              -20.78
                       Vipul Verma's portfolio                                                 HCL Tech                15%           456.05            460.15             0.90
                                                                                               Sintex Ind.             13%           182.25            141.7              -22.25
           Stock                  Weightage Previous Price Current Price           Change
                                                                                               Tata Steel              12%           678.95            610.75             -10.04
                                             (As on 31/12/2010) (As on 24/03/2011) (in %)
           Kotak M Bank           15%        452.45             445.1              -1.62       Eros Int. Media         10%           158.3             129.3              -18.32
           Renuka Sugars          25%        97.05              72.6               -25.19      Exide Ind.              10%           166.8             134.5              -19.36
           HDIL                   15%        194.25             161.4              -16.91      IDBI Bank               5%            164.75            137.8              -16.36
           Tech Mahindra          25%        702.4              734.8               4.61       Yes Bank                5%            312.7             293.4              -6.17
           Jain Irrigation        20%        210.8              186.5              -11.52      Value of Investment                   5,00,000          432569.3           -13.49
           Value of Investment               5,00,000           448845.2           -10.23

                       Rajesh Jain's portfolio                                                            Jagannadham Thunuguntla's portfolio
           Stock                   Weightage Previous Price        Current Price Change
                                                (As on 31/12/2010) (As on 24/03/2011) (in %)   Stock                 Weightage Previous Price      Current Price       Change
                                                                                                                                 (As on 31/12/2010) (As on 24/03/2011) (in %)
           Indraprastha Gas        15%          342.75            300                -12.47
                                                                                               HUL                   6%          312.3             268.8               -13.93
           Sun Pharma          25%              484.65            454.45             -6.23
                                                                                               M&M                   8%          777.55            664.35              -14.56
           Lupin               20%              480.45            407.3              -15.22
           GAIL                15%              510.8             459.35             -10.07    HDFC Bank             7%          2,346.50          2191.5              -6.61
           ITC                 25%              174.5             172.85             -0.95     Siemens               8%          820.75            876.15              -6.75
           Value of Investment                  5,00,000          458894.8           -8.22     HDFC                  8%          727.95            643.55              -11.59
                                                                                               L&T                   7%          1,979.05          1549                -21.73
                                                                                               TCS                   9%          1,165.05          1093.45             -6.15
                         PK Agrawal's portfolio                                                Wipro                 7%          490.25            439.65              -10.32
           Stock                  Weightage Previous Price      Current Price Change           RIL                   7%          1,058.25          1010.1              -4.55
                                              (As on 31/12/2010) (As on 24/03/2011) (in %)
                                                                                               JSW Steel             6%          1,176.20          898.3               -23.63
           GAIL                   20%         510.8             459.35              -10.07     Bharti Airtel         7%          358.40            332.9               -7.11
           Infosys                20%         3,445.00          3004.9              -12.78     ITC                   5%          174.50            172.85              -0.95
           Cipla                  20%         369.9             305.65              -17.37     Cash                  15%            75,000         75,000

           Bharti Airtel          20%         358.4             332.9               -7.11      Value of Investment               500,000           460357.5            -7.93

           HUL                    20%         312.3             268.8               -13.93              Here is the performance of portfolios suggested by the
           Value of Investment                5,00,000          438739.1            -12.25                                    brokers in 01-15 January issue.
                                                                                                                 Sensex offered -10.52% return during the period.
           72      MONEY MANTRA    1-15 April, 2011

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