17 March 2001

GTB-UTI Bank may be called off
Mumbai: In light of the continued controversy on the alleged share price manipulation by Global Trust Bank (GTB) and the subsequent revaluation of its merger proposal with UTI Bank, it is understood that the former is likely to walk out of the merger deal.

The new valuation report, to be prepared by Deloitte, Haskins & Sells, is likely to suggest a share swap ratio lower than 2.25 (nine shares of UTI Bank to four shares of Global Trust Bank) recommended earlier by the report prepared by SBI Capital Markets.

According to industry sources, GTB is unlikely to settle in for a swap ratio which would be at a variance with the original swap ratio.

Though senior officials of both the banks say that the merger is on, the appointment of Deloitte for a revaluation has not been taken well by GTB.

The earlier report prepared by SBI Caps, had taken into account the hidden non-performing assets of GTB as per the inspection report of Reserve Bank of India. Though the net NPAs of GTB in the inspection report was shown to be 1.8 per cent, industry sources say that net NPAs of GTB could be close to four per cent.

Further, GTB had extended huge loans to the diamond industry as well as some big groups in the south which have turned sticky. UTI Bank is also said to be worried about GTB's funded exposure of around Rs 500 crore and Rs 200 crore of non-funded exposure in the capital markets.

Film producers may get finance from IDBI
Mumbai: In a move that could go a long way in institutionalising film financing and curbing the influence of the underworld, leading finance institution, Industrial Development Bank of India (IDBI) has decided to take the plunge in film financing.

IDBI acting chairman SK Chakravarty said that the institution is prepared to finance films, both in Hindi and in regional languages, and television serials among others by charging a maximum interest of 16 per cent.

The IDBI executive committee has approved the final draft proposal on the funding modalities. The institution is said to go by the track record of the producer and has stated that it will take a lot of precautions before clearing funding proposals.

Only corporate entities, promoted by reputed producers, directors and technicians, are likely to be funded and not those by individuals or proprietors.

Promoters are expected to bring in not less than 30 per cent of the film's budget and the loan tenure is expected to be for two years. Besides, producers are also expected to offer personal guarantees. The FI is also working out other modalities like quantum of assistance, debt-equity ratio etc.

Leading luminaries of the film industry have hailed this move and believe that this is likely to bring about greater discipline in the industry and production delays will be minimized.

15 March 2001

ICICI cuts interest rates on loans, bonds
Mumbai: ICICI has cut interest rates on its loans as well as its latest Safety Bond offering. The prime lending rate has been cut by half a percentage point to 12.5 per cent and the yield on five-year Safety Bonds has been cut by one whole percentage point to 10 per cent.

The decision follows the government's move to cut the benchmark interest rate on small saving schemes and public provident fund scheme by 1.00-1.5-percentage points and the RBI decision to cut the Bank Rate in two stages.

ICICI's short-term prime rate now stands at 12.5 per cent. The STPLR is applicable for loans of a variable maturity and is re-set annually. The medium term PLR, applicable for loans up to three years and long-term prime lending rate also stand at 12.5 per cent.
The ICICI's decision to unify all three lending rates comes at a time when leading banks have introduced variable interest rates for short and long-term loans.
 
Relief bonds rates down to 8.5 per cent
New Delhi: The ministry of finance (MoF) has announced reduction of interest rates on relief bonds by 0.5 per cent to 8.5 per cent. Besides, rates on loans to government employees for purchase of houses, vehicles and computers have come down by 1 per cent. The rates on relief bonds have been reduced from 9 to 8.5 per cent from March 15. The 1 per cent reduction on the loans to government employees will be effective from April 1.

The rates have been slashed in the face of reduction in interest rates on general provident funds, special deposit schemes and other small savings scheme.

RBI opts for fresh valuation on UTI Bank-GTB merger
Mumbai: The Reserve Bank of India (RBI) has sought a second valuation exercise for the UTI Bank-Global Trust Bank (GTB) merger, following the controversy over alleged price manipulation in the GTB stock. The new valuation will now factor in the alleged price manipulation. UTI Bank too is reportedly in favour of a second opinion on valuation, which is now expected in about a week's time from Deloitte, Haskins & Sells.

The initial valuation had taken into account four factors - market value, book value, earnings per share and maintainable profits. The earlier swap ratio was four shares of GTB for every nine UTI Bank shares held, and some circles found it to be loaded in GTB's favour. Now Deloitte has been given complete freedom by the two banks to decide on the ratio based on whatever parameters it deems fit.

14 March 2001

UTI Bank wants to review merger with GTB
Mumbai: UTI Bank has reportedly threatened to pull out of the proposed merger with Global Trust Bank over sharp differences on the issue of going in for a fresh valuation, to review the share swap ratio decided for the merger. The demand for a fresh valuation exercise is likely to review once again the quality of GTB's assets and its capital market exposure.

GTB is however, unwilling to accede to UTI Bank's demand saying that valuation done by SBI Capital Markets, has already been accepted by the boards and shareholders of both the banks.
Though the share swap ratio of 9:4 was loaded in favour of GTB shareholders, the UTI Bank had not made an issue about this as it wanted the merger to go through smoothly and compromised on somewhat unfavourable swap ratio, as the price to have control over the bank.

Cholamandalam to expand its retail finance portfolio
Chennai: Cholamandalam Investment & Finance Company Ltd. (CIFCL), retail financing arm of the Murugappa Group, has plans to double disbursement to Rs 1,000 crore in the coming fiscal. The company, which has diversified into two-wheeler financing and personal loan products to its customers, is also set to enter northern and eastern regions.

During the year ended June 30, 2000, the company had achieved 61 per cent growth in disbursements at Rs 274 crore, against 18 per cent last year. Mr. P N Vasudevan, business head (vehicle finance) has said that the company is financing 1,500 vehicles per month and has stepped up disbursement target for March to Rs 50 crore from Rs 40.63 crore achieved in February. The aggregate disbursals is set to touch Rs 340 crore in the first nine months till March end this year. On an annualised basis, it is projected to be Rs 500 crore till June 30, 2001, yielding a growth of over 75 per cent.

Of the total disbursal target of Rs 1,000 crore, Rs 800 crore would come from commercial vehicles and car loan segments. The company already into two wheeler financing has a disbursement target of Rs 120 crore set for next year, while balance Rs 80 crore would come from the "comfort range of products" for its customers with proven credentials. These will include personal loans, education and travel loans besides financing the purchase of durables.

GE Cap launches Rs 50-crore bonds
Mumbai: GE Capital has launched the first ever bond issue in the country, where the book-building exercise will decide the trend of the issue rather than the coupon rate. ABN-Amro Securities is the sole arranger to the issue. The Rs 50 crore issue has a green-shoe option to retain over-subscription up to Rs 50 crore. The book-building range is 45 to 75 days, with a fixed coupon rate of 9.75 per cent, payable on redemption of the paper.

This is the third issue by GE Caps within the last six months. In November, GE floated two issues for a total amount of Rs 75 crore. Both the 12-month bonds were linked to the Reuters 3-month CP reference rate. The first issue of Rs 25 crore was a one-to-one deal with HDFC Bank. The bank took the entire issue on its books.

13 March 2001

IFC to invest $330 million in India this fiscal year
Mumbai: The International Finance Corporation (IFC) will be investing about $330 million in India in fiscal year 2001-'02, almost accounting for ten per cent of its total foreign direct investment (FDI). About 60 per cent of these investments have already been approved and rest is to be approved by June.

India has already emerged to be the single largest recipient of IFC funds in terms of new approvals worldwide. India has been the sixth largest recipient of IFC funds over the years. IFC has a $608 million portfolio in India as of December 31, 2000, which consists of investments in 70 companies.

IFC focus would include financial services, infrastructure, health and education, small-and-medium-enterprises (SMEs) and the new economy sector. In the finance sector, IFC will concentrate on structured finance products like securitisation, housing finance, trade finance and bringing small-and-medium-enterprises to the market.

9 March 2001

Eradi panel wants lesser tax on life policy income
New Delhi: The Eradi panel has asked the government to lower the tax on income of life insurance policy holders from 12.5 per cent to 5-7 per cent, to increase the spread of insurance cover in the country. The recommendations of the panel are reported to be under active consideration of the government. The Eradi committee had suggested a lower tax rate of five per cent to ensure relief to small policyholders, accounting for 76 per cent of LIC's policyholders with income below taxable limits.

While Mr. Yashwant Sinha, finance minister, has announced "level playing field" in terms of tax incentives allowed by deduction or rebate on payment of LIC premium to all life insurance companies, the Central Board of Direct Taxes (CBTD) is yet to come out with a clear guidelines on tax rates.

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