India Infoline Weekly Newsletter - May 10, 2013

India Infoline News Service | Mumbai |

The Sensex surged past the 20,000 mark while the Nifty came close to its 2013 peak this week, overcoming last month's trade deficit concerns. On the political front, the Congress staged a comeback in the Karnataka assembly polls. India’s growth in industrial productivity accelerated to 2.5% YoY in March on better performance by the manufacturing and power sectors.

Top Stories


March IIP at 2.5%, FY13 growth hits two decade low

The Quick Estimates of Index of Industrial Production (IIP) with base 2004-05 for the month of March 2013 have been released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation. The General Index for the month of March 2013 stands at 192.3, which is 2.5% higher as compared to the level in the month of March 2012. The cumulative growth for the period April-March 2012-13 over the corresponding period of the previous year stands at 1.0%. The General Index for the month of March 2013 stands at 192.3, which is 2.5% higher as compared to the level in the month of March 2012. The cumulative growth for the period April-March 2012-13 over the corresponding period of the previous year stands at 1.0%. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of March 2013 stand at 145.3, 205.0 and 164.2 respectively, with the corresponding growth rates of (-) 2.9%, 3.2% and 3.5% as compared to March 2012. The cumulative growth in the three sectors during April-March 2012-13 over the corresponding period of 2011-12 has been (-) 2.5%, 1.2% and 4.0% respectively.

In terms of industries, ten (10) out of the twenty two (22) industry groups (as per 2-digit NIC-2004) in the manufacturing sector have shown positive growth during the month of March 2013 as compared to the corresponding month of the previous year. The industry group ‘Wearing apparel; dressing and dyeing of fur’ has shown the highest positive growth of 152.3%, followed by 64.6% in ‘Electrical machinery and apparatus n.e.c.’ and 37.7% in ‘Medical, precision & optical instruments, watches and clocks’. On the other hand, the industry group ‘Publishing, printing and reproduction of recorded media’ has shown a negative growth of 23.2% followed by 22.0% in ‘Office, accounting & computing machinery’ and 11.4% in both ‘Fabricated metal products, except machinery & equipment’ and ‘Other transport equipment’...Read More

Unilever's open offer for HUL to begin on June 21

HSBC Securities and Capital Markets (India) Pvt Ltd ("Manager to the Open Offer") on behalf of the Unilever PLC ("Acquirer") along with Unilever N.V. in its capacity as person acting in concert (the PAC") has informed this Detailed Public Statement ("DPS") the public shareholders of the Hindustan Unilever Ltd ("Target Company"), in compliance with Regulation 6 read with Regulations 13(4), 14 and 15(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SEBI (SAST) Regulations, 2011"), pursuant to the Public Announcement (‘PA’) filed on April 30, 2013 with the BSE Limited ("BSE"), the National Stock Exchange of India Limited ("NSE"), the Securities and Exchange Board of India ("SEBI") and the Target Company in terms of Regulation 6 of the SEBI (SAST) Regulations, 2011.

The Offer:

  • This Open Offer is for the acquisition of 487,004,772 Shares representing 22.52% of the Voting Share Capital of the Target Company. The price being offered under this Open Offer is Rs600 per Share (the "Open Offer Price'), in accordance with Regulation 8 of the SEBI (SAST) Regulations, 2011.
  • The Open Offer Price will be payable in cash by the Acquirer, in accordance with the provisions of Regulation 9(1)(a) of the SEBI (SAST) Regulations, 2011.
  • The open offer would begin on June 21 and close on July 4, HUL said.
  • Last week, HUL's board had constituted a committee of independent directors to provide recommendation to the shareholders about the open offer.

CBI a caged parrot, Coalgate report changed by govt: SC

According to reports, the Supreme Court called the Central Bureau of Investigation (CBI) a caged parrot. "CBI has become a caged parrot speaking in master's voice," the apex court reported. CBI's affidavit reportedly shows that the investigative agency has many masters, the court said. "It's a sordid saga that there are many masters and one parrot," the court said.

Supreme Court reportedly said that the CBI must know how to stand up against all pulls and pressures by government and its officials. The court expressed its concern over the government's interference in CBI probe in coal scam and other cases, according to reports.

Parliament adjourned sine die 2 days prior to its scheduled close

The budget session of the Parliament was adjourned sine die on Wednesday amid Opposition’s demands for heads of Prime Minister Manmohan Singh, Law minister Aswani Kumar and Raliway Minister PK Bansal. The Opposition also refused to let both houses of the Parliament to function. Due to which the crucial Food Security Bill couldn’t be passed. The second leg of the budget session, which began on April 22, was adjourned sine die two days prior to its scheduled end of the session. Crucial legislations which UPA wanted to pass before the elections such as Food Security - which analysts say was UPA’s security in 2014 and Land Acquisition Bill were stalled vis-à-vis an unrelenting Opposition. Opposition’s pre-condition for letting the bills pass was removal of Bansal and Kumar.

Cobrapost expose: 23 bks, insurance cos in money laundering net

Cobrapost’s expose on money laundering has now spread to encompass 23 banks and insurance companies. If you thought only private players were bending the rules, marquee state-owned names like Life Insurance Corporation of India and State Bank of India along with other PSU entities would come as a shocker. In all, 23 banks and insurance companies have been exposed, namely, State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Indian Bank, Indian Overseas Bank, IDBI Bank, Oriental Bank of Commerce, Dena Bank, Corporation Bank, Allahabad Bank, Central Bank of India, all public sector banks, and their insurance associates; Yes Bank, Dhanlaxmi Bank, Federal Bank, DCB Bank, HDFC Bank, ICICI Bank and Axis Bank, all private banks, and their insurance allies; besides the state-owned LIC of India, Reliance Life Insurance and Birla Sunlife, and Tata AIG, among private sector insurers. Operation Red Spider 2 establishes beyond doubt that money laundering is not confined to private banks, and is not an aberration, as is being made out in certain quarters in the wake of the first expose on March 14 in which HDFC Bank, ICICI Bank and Axis Bank were shown involved in money laundering; it is rather endemic overarching the entire banking system and insurance sector, without exception, however shocking it might be. The scale is vast and unfathomable. Among the private insurers, Reliance Life Insurance, a subsidiary of Reliance Capital, in a very short span of its existence of less than a decade, has witnessed spectacular growth to become the largest private life insurer in 2012...Read More

Fitch cautions on banks’ asset quality, funding risk

The central bank's recent rate cuts are unlikely to ease asset-quality pressures to any great extent or help Indian banks correct their funding imbalances, Fitch Ratings says. The banks' latest results show a continued decline in overall asset quality as the economic downturn persists. The infrastructure sector is likely to be the biggest risk for Indian banks in the year ending March 2014 (FY14), putting pressure on asset quality and exacerbating structural funding mismatches. The pace of infrastructure restructuring is likely to accelerate, as the start dates of projects under construction are delayed over the next 18 months. Infrastructure (including power and telecom) accounted for around 23% of corporate debt restructurings at end-March 2013, up from 20.5% a year ago. Lending to the sector has been aggressive since FY08; and despite some moderation in FY13, it represents the largest single-sector concentration for Indian banks. We believe that key structural impediments - such as the availability of fuel, rising input costs and government clearances - will be hard to resolve in the short term despite recent government initiatives to tackle them. However, the outlook could improve in the medium term if some recently announced policies are effective.

In the meantime, we expect restructured loans to keep rising faster than NPLs and assets. The pace of NPL accretion is slowing, thanks to the central bank's cumulative monetary easing in FY13. However, the central bank's concerns about inflationary pressures and the twin deficit means there is limited scope for further monetary easing after Friday's 25bp rate cut. A slower-than-expected recovery could cause NPL growth to pick up again. We estimate gross NPLs will approach 4.2% for FY13 and 4.4% in FY14 as bad loans start to level off, with very gradual easing of cyclical pressures. The long-term nature of infrastructure assets leaves banks more exposed to asset/liability mismatches, particularly as deposit-gathering has not kept pace with credit growth. The persistent negative real interest rates have channelled domestic savings into alternative investments, and the banking system loans-to-deposit ratio has risen to 78% in March from 72% at FYE10...Read More

SC refuses to extend Bombay HC interim order on Maharashtra LBT

The Supreme Court today rejected to extend a Bombay High Court interim order staying imposition of local body tax for now. The apex court has asked the high court to decide several petitions filed by traders and corporators challenging the new tax as soon as possible.

What is local body tax?

LBT is a tax that traders will pay the municipal corporation for importing goods into the city. Octroi is paid by traders every time goods enter the city, at octroi nakas. LBT is an account-based cess collection for every raw material used or imported into the city’s limits by all businesses, traders and manufacturers. With LBT, the shopkeeper will have to pay the tax using various levels. This could be over the counter at the civic body, the authorised banks, or even at the LBT portal which the municipal corporation body will put in place. All shopkeepers, who sell goods worth more than a certain amount, have to pay this tax. Further, according to LBT rules, it is the responsibility of the traders to maintain records and also pay the tax. With LBT, officers of Brihanmumbai Municipal Corporation can check any trader’s books and impose fine of up to five times the disputed amount. At least 19 of the 25 corporations have switched to the local body tax replacing the octroi tax. The LBT will be from 0% to 7% of a trader’s turnover.

How LBT had impacted Mumbai?

Over a million retail shops in Mumbai had closed their shops from Monday to protest against the local body tax (LBT) which would be effective from 1st October in the city. Once implemented, LBT will replace the traditional octroi. LBT has already replaced octroi in the rest of Maharashtra. Besides retail shops, wholesale trading in clothes, electronics, hardware, mobile recharge stores, cosmetic shops, metals, cloth and all types of manufacturing activities in Mumbai had been paralysed since Monday causing inconvenience to millions of customers. Apart from Mumbai, cities like Pune, Pimpri, Chindwad, Nagpur, Nanded and Kolhapur has also participated in the strike indicating widespread anger among traders against LBT, which they perceived as unfair. The traders in many cities have opposed LBT and have resorted to agitations of various kinds since April 1.

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