China's central bank Governor Zhou Xiaochuan said there's room to raise interest rates as the government tries to tame the fastest inflation in 11 years.
``There is still room for further interest-rate increases,'' Zhou said in Beijing today. ``U.S. rate cuts recently have made our rate decisions more difficult.''
China is trying to rein in prices without choking off growth in the world's fourth-biggest economy. Zhou and other senior officials briefed reporters amid economists' skepticism that the government's goal of capping inflation at 4.8 percent this year is realistic.
``We believe that the government is still underestimating the risk of inflation,'' said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. ``Our current forecast of CPI inflation is 6.4 percent for this year.''
China raised rates six times last year, pushing the key lending and deposit rates to nine-year highs of 7.47 percent and 4.14 percent. Federal Reserve cuts to borrowing costs may increase the flow of money into China from investors seeking bigger returns just when Zhou is trying to rein in the money supply.
The inflation rate surged to 7.1 percent in January on food and fuel costs.
Friday, March 7, 2008
N-deal: Left seeks meeting of UPA-Left Committee
As government raised the pitch on the Indo-US nuclear deal in the face of Washington's insistence on a May deadline, the Left allies have also stepped up pressure by seeking an immediate meeting of UPA-Left Committee on the issue by March 15.
CPI(M) General Secretary Prakash Karat has written to External Affairs Minister Pranab Mukherjee, government's key interlocutor with the allies on the deal, asking for immediate convening of a meeting of the UPA-Left Committee on the nuclear deal by mid-March.
CPI leader D Raja, a member of the Committee, met Karat this morning and discussed the strategy on getting from the government its position on whether it wants to go ahead with the deal despite Left's opposition to it.
Sources said Karat's letter comes against the backdrop of reports that the text of the draft India-specific Safeguards Agreement with the IAEA is more or less ready and the Left parties would like to have a discussion on that.
The Left missive also assumes significance in the context of the American deadline of May for the 123 agreement to be sent to the US Congress.
It is necessary for the government to complete the IAEA agreement by March end so that they can proceed to the Nuclear Suppliers Group for getting a waiver to do nuclear commerce with other countries.
"The Americans have set a deadline for the government. The Left parties will also have to set a deadline for the government. The next meeting of the UPA-Left Committee will be crucial," a senior Left leader told media.
CPI(M) General Secretary Prakash Karat has written to External Affairs Minister Pranab Mukherjee, government's key interlocutor with the allies on the deal, asking for immediate convening of a meeting of the UPA-Left Committee on the nuclear deal by mid-March.
CPI leader D Raja, a member of the Committee, met Karat this morning and discussed the strategy on getting from the government its position on whether it wants to go ahead with the deal despite Left's opposition to it.
Sources said Karat's letter comes against the backdrop of reports that the text of the draft India-specific Safeguards Agreement with the IAEA is more or less ready and the Left parties would like to have a discussion on that.
The Left missive also assumes significance in the context of the American deadline of May for the 123 agreement to be sent to the US Congress.
It is necessary for the government to complete the IAEA agreement by March end so that they can proceed to the Nuclear Suppliers Group for getting a waiver to do nuclear commerce with other countries.
"The Americans have set a deadline for the government. The Left parties will also have to set a deadline for the government. The next meeting of the UPA-Left Committee will be crucial," a senior Left leader told media.
Pressure on oil cos as crude price rises to $106
TIMES NEWS NETWORK
New Delhi: International crude's relentless march northwards, testing the $106 a barrel-mark on Friday, will completely wipe out the marginal reprieve state-owned oilmarketing companies received from last month's increase in pump prices and build pressure on finance minister P Chidambaram to reduce oil taxes, a mood he is unlikely to share in the season of poll handouts.
Last month, the government raised prices of petrol by Rs 2 a litre and diesel by Re 1 but left cooking gas and kerosene prices untouched. This gave a benefit of Rs 840 crore, a drop in the ocean when they were looking at ending the year with a loss of Rs 71,808 crore. Again, the inadequacy of the measure becomes stark considering that the present pump prices correspond to roughly $70 a barrel, leaving a yawning gap with international price.
The government's simultaneous move to increase the quantum of bonds— Centre's IOUs—to 56-57% of the losses amounting to Rs 41,000 crore, up from 42.7% or Rs 24,000 crore also did not do much to lift oilmarketing firms' spirits as the revision had shaved the retailers' share of loss-bearing by a mere 1.2% from 8.4%.
The domestic crude and gas producers such as ONGC, OIL and GAIL were to continue to share 24% of the total losses, while the marketing firms were to continue to suffer their share of under-recovery.
During the discussions ahead of the price increase, a big and influential section among the policymakers—including agriculture minister Sharad Pawar and oil minister Murli Deora—steadfastly demanded reduction in customs and excise levies on motor fuels.
New Delhi: International crude's relentless march northwards, testing the $106 a barrel-mark on Friday, will completely wipe out the marginal reprieve state-owned oilmarketing companies received from last month's increase in pump prices and build pressure on finance minister P Chidambaram to reduce oil taxes, a mood he is unlikely to share in the season of poll handouts.
Last month, the government raised prices of petrol by Rs 2 a litre and diesel by Re 1 but left cooking gas and kerosene prices untouched. This gave a benefit of Rs 840 crore, a drop in the ocean when they were looking at ending the year with a loss of Rs 71,808 crore. Again, the inadequacy of the measure becomes stark considering that the present pump prices correspond to roughly $70 a barrel, leaving a yawning gap with international price.
The government's simultaneous move to increase the quantum of bonds— Centre's IOUs—to 56-57% of the losses amounting to Rs 41,000 crore, up from 42.7% or Rs 24,000 crore also did not do much to lift oilmarketing firms' spirits as the revision had shaved the retailers' share of loss-bearing by a mere 1.2% from 8.4%.
The domestic crude and gas producers such as ONGC, OIL and GAIL were to continue to share 24% of the total losses, while the marketing firms were to continue to suffer their share of under-recovery.
During the discussions ahead of the price increase, a big and influential section among the policymakers—including agriculture minister Sharad Pawar and oil minister Murli Deora—steadfastly demanded reduction in customs and excise levies on motor fuels.
Bosch
Bosch net profit rises 91.52% in the December 2007 quarter
Sales rise 15.08% to Rs 1107.02 crore
Net profit of Bosch rose 91.52% to Rs 124.41 crore in the quarter ended
December 2007 as against Rs 64.96 crore during the previous quarter ended
December 2006. Sales rose 15.08% to Rs 1107.02 crore in the quarter ended
December 2007 as against Rs 961.94 crore during the previous quarter ended
December 2006.
For the full year, net profit rose 11.17% to Rs 609.21 crore in the year
ended December 2007 as against Rs 548.00 crore during the previous year
ended December 2006. Sales rose 13.11% to Rs 4279.63 crore in the year ended
December 2007 as against Rs 3783.68 crore during the previous year ended
December 2006.
capmkt
Sales rise 15.08% to Rs 1107.02 crore
Net profit of Bosch rose 91.52% to Rs 124.41 crore in the quarter ended
December 2007 as against Rs 64.96 crore during the previous quarter ended
December 2006. Sales rose 15.08% to Rs 1107.02 crore in the quarter ended
December 2007 as against Rs 961.94 crore during the previous quarter ended
December 2006.
For the full year, net profit rose 11.17% to Rs 609.21 crore in the year
ended December 2007 as against Rs 548.00 crore during the previous year
ended December 2006. Sales rose 13.11% to Rs 4279.63 crore in the year ended
December 2007 as against Rs 3783.68 crore during the previous year ended
December 2006.
capmkt
BPCL
Bharat Petroleum Corp's is likely to process 9.5 percent less crude at its two key refineries in the next fiscal year beginning April compared with this year, due to planned shutdowns.
Saturday, March 1, 2008
A new Multi bagger
Global board reccomended to buy at 2.10
tgt 6 by year end.
i..e., 3 times the return
tgt 6 by year end.
i..e., 3 times the return
Budget View
Given the election year, the finance minister (FM) tabled a populist budget aimed at pleasing a large section of rural population and also the salaried middle class. Apart from the substantial increase in budgetary allocation for rural and social infrastructure, the budget has proposed huge debt waiver and relief worth Rs60,000 crore to farmers. But in spite of the increased expenditure, the fiscal prudence has been maintained with fiscal deficit target set at 2.5% for 2008-09.
Key Features of Budget 2008-2009
THE ECONOMY : AN OVERVIEW
! The Gross Domestic Product increased by 7.5 per cent, 9.4 per cent and 9.6 percent
in first three years, of the UPA Government resulting in an unprecedented average
growth rate of 8.8 per cent. The drivers of growth continue to be 'services' and
'manufacturing' which are estimated to grow at 10.7 per cent and 9.4 per cent
respectively.
! Growth rate in agriculture for 2007-08 is estimated at 2.6 per cent.
! Food grain production in 2007-08, estimated at 219.32 million tonnes-an all time
record. Rice production at 94.08 million tonnes, maize at 16.78 million tonnes,
soya bean at 9.45 million tonnes, cotton at 23.38 million bales each, an all time
record.
! Rashtriya Krishi Vikas Yojana launched with an outlay of Rs. 25,000 crore, National
Food Security Mission with an outlay of Rs. 4,882 crore under National Policy for
Farmers in the Eleventh Five Year Plan.
THE GROWTH STORY : FASTER AND MORE INCLUSIVE
! Agricultural credit poised to reach Rs. 2,40,000 crore by March, 2008.
! 11.4 crore children covered under Mid Day Meal Scheme, the largest school lunch
programme in the world.
! Under National Rural Health Mission 8,756 primary health centres have been made
24x7 .
! 1,82,000 girls enrolled in residential schools under Kasturba Gandhi Balika
Vidyalaya Scheme.
BHARAT NIRMAN
! Bharat Nirman has made impressive progress in 2007-08 with 290 habitations
provided with drinking water each day, 17 habitations connected through all weather
road, 52 villages provided telephones, 42 villages electrified & 4,113 rural houses
completed each day.
ELEVENTH FIVE YEAR PLAN: THE CRUCIAL SECOND YEAR
! GBS 2008-09 at Rs.2,43,386 crore higher by Rs. 38,286 crore over 2007-08. Central
Plan allocation at Rs.1,79,954 crore, an increase of 16 percent over 2007-08; Bharat
Nirman to get Rs. 31,280 crore.
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! Sarva Shiksha Abhiyan (SSA): Sarva Shiksha Abhiyan provided Rs.13,100 crore
with the focus to shift from access and infrastructure at the primary level to enhancing
retention and improving quality of learning. Mid-day Meal to get Rs. 8,000 crore;
secondary education to get Rs. 4,554 crore.
! Jawahar Navodaya Vidyalaya : Rs. 130 crore provided in 2008-09, to establish
Navodaya Vidyalaya in 20 districts having large concentration of Scheduled Castes
& Scheduled Tribes.
! Kasturba Gandhi Balika Vidyalaya: Funds (as part of SSA) provided for additional
410 Vidyalayas in educationally backward areas. Rs. 80 crore allocated to set up
new or upgrade existing hostels attached to Balika Vidyalaya.
! National Means-cum-Merit Scholarship: Rs. 750 crore allocated to build up a corpus
of Rs.3,000 crore in four years. 1,00,000 Scholarship to be awarded beginning
2008-09.
! Nehru Yuva Kendra: Rs. 10 crore allocated in 2008-09 to set up a Kendra in 123
districts, and to cover recurring expenditure in the first year.
! Mid Day Meal Scheme: Extended to upper primary classes in Government and
Government aided schools in all blocks which will benefit 2.5 crore children taking
the total number of children covered under the scheme to 13.9 crore.
! Institutes of Higher Education: India to become a knowledge society, three IISERs
at Mohali, Pune and Kolkata; and an IIIT at Kanchipuram have started
functioning.Government to set up 16 Central Universities in each of the hitherto
uncovered states; three IITs in Andhra Pradesh, Bihar and Rajasthan; two IISERs
at Bhopal and Tiruvananthapuram; and two Schools of Planning and Architecture
at Bhopal and Vijayawada: Rs. 5 crore grant provided to Deccan College, Postgraduate
and Research Institute, Pune.
! Science and Technology: Rs.85 crore allocated for Innovation in Science Pursuit
for Inspired Research (INSPIRE); which will include scholarships for young learners
(10-17 years), scholarships for continuing science education (17-22 years) and
opportunities for research careers (22-32 years); Rs. 100 crore provided for
establishing the National Knowledge Network.
! Health Sector: Rs.16,534 crore allocated, for the sector marking an increase of
15% over 2007-08.
National Rural Health Mission (NRHM): 462,000 Associated Social Health
Activitists have been trained, 177,924 villages have sanitation committees functional
and 323 district Hospitals have been taken up for upgradation. Allocation to NRHM
has been increased to Rs. 12,050 crore.
! HIV/AIDS: The National Aids Control Programme provided Rs.993 crore.
! Polio: Drive to eradicate polio continues with revised strategy and focus on the
high risk districts in Uttar Pradesh and Bihar. Rs. 1,042 crore allocated in 2008-09.
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! Rashtriya Swasthya Bima Yojana : Rashtriya Swasthya Bima Yojana to provide
health cover of Rs.30,000 for every worker in the unorganised sector falling under
the BPL category and his/her family. The Yojana will be launched in Delhi and in
the States of Haryana and Rajasthan on April 1, 2008. Rs.205 crore provided as the
Centre's share of the premia in 2008-09.
! National Programme for the Elderly: National Programme for the Elderly to be
started in 2008-09 with a Plan outlay of Rs.400 crore. Two National Institutes of
Ageing, eight regional centres, and a department for geriatric medical care in one
medical college/tertiary level hospital in each State to be established during the
Eleventh Plan period.
! Integrated Child Development Services (ICDS): Allocation for ICDS enhanced
from Rs.5,293 crore in 2007-08 to Rs.6,300 crore in 2008-09; Remuneration of
Anganwadi workers being increased from Rs.1,000 per month to Rs.1,500 per
month; remuneration of Anganwadi Helpers increased from Rs.500 per month to
Rs.750 per month; over 18 lakh Anganwadi workers and helpers to benefit; 5,959
ICDS projects and 932,000 Anganwadi and mini-Anganwadi centres functional
under ICDS at the end of December 2007.
Flagship Programmes
! National Rural Employment Guarantee Scheme (NREGS): NREGS to be rolled
out to all 596 rural districts in India with provision of Rs.16,000 crore; More money
will be provided to meet the legal guarantee of employment as demand rises.
! Jawaharlal Nehru National Urban Renewal Mission (JNNURM): Allocation for
JNNURM increased to Rs.6,866 crore in 2008-09 from Rs.5,482 crore in 2007-08.
! Rajiv Gandhi Drinking Water Mission: Allocation for Rajiv Gandhi Drinking Water
Mission enhanced to Rs.7,300 crore in 2008-09 as against Rs.6,500 crore in
2007-08;
! Total Sanitation Campaign to be provided Rs.1,200 crore in 2008-09.
! Desalination Plant near Chennai: Rs.300 crore in 2008-09 for a desalination plant
near Chennai to be set up under public private partnership.
! North Eastern Region (NER): Ministry of Development of North Eastern Region
to be provided Rs. 1,455 crore. Including this amount, total Budget allocation for
NER, to increase to Rs.16,447 crore in 2008-09 from Rs.14,365 crore in 2007-08.
! Development and Finance Corporations: Additional equity contributions proposed
for National Minorities Development and Finance Corporation Rs. 75.00 crore,
National Finance and Development Corporations for weaker sections
comprising Safai Karamcharis, Scheduled Castes and Backward Classes. Rs. 106.50
crore, National/State Scheduled Tribes Finance and Development Corporations
Rs. 50.00 crore, National Handicapped Development Corporation Rs. 9.00 crore.
! Scholarships: Pre- and post-matric scholarship programmes announced in previous
Budgets for SC, ST, OBC and minorities to get further funds in 2008-09: Scheduled
Castes (Rs.804 crore), Scheduled Tribes (Rs.195 crore), Other Backward Classes
(Rs.164 crore) and Minorities (post-matric) (Rs.100 crore).
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! Rajiv Gandhi National Fellowship Programme supporting SC and ST students
pursuing M.Phil and PhD courses allocated Rs.75 crore in 2008-09.
! Minorities: Allocation to the Ministry of Minority Affairs increased from Rs.500
crore in 2007-08 to Rs.1,000 crore in 2008-09; Report of the Justice Rajindar
Sachar Committee taken up for speedy implementation.
Women and Children
! Rs, 11,460 crore has been provided for 100% women specific programmes and
Rs. 16,202 crore for schemes where at least 30 per cent allocation is for women
specified programmes.
! Allocation for Ministry of Women and Child Development enhanced by 24% to
Rs. 7,200 crore in 2008-09.
Self Help Groups
! Life Insurance Corporation of India being asked to scale up Janashree Bima Yojana
scheme to cover all women self help groups that are credit-linked to the banks; of
Rs. 500 crore proposed to be contributed to the corpus of the Social Security Fund
with annual contributions to be made as the scheme is scaled up.
Supplement to GBS:
! Rs.8,365 crore provided as additional funds for Plan 'B' through two supplementaries
in 2007-08; additional resources to the tune of Rs.10,000 crore to be mobilized
under Plan 'B' for Plan Capital expenditure in 2008-09 also.
Agricultural Credit:
! Growth of agricultural credit set to exceed target set for 2007-08. For 2008-09,
target set at Rs.280,000 crore, with short-term crop loans continued to be disbursed
at 7 per cent per annum; initial provision of Rs.1,600 crore made for interest
subvention in 2008-09.
Investment in Agriculture:
! Gross Capital Formation (GCF) in agriculture as a proportion of GDP in the
agriculture sector improves from a low of 10.2 per cent in 2003-04 to 12.5 per cent
in 2006-07; Target to raise it to 16 per cent during the Eleventh Plan to achieve the
growth rate of 4 per cent.
Water Resources:
! Accelerated Irrigation Benefit Programme (AIBP): 24 major and medium irrigation
projects and 753 minor irrigation schemes to be completed in 2007-08, creating
additional irrigation potential of 500,000 hectare; Outlay for 2008-09 increased to
Rs. 20,000 crore, from Rs.11,000 crore in 2007-08.
! Rainfed Area Development Programme finalised and to be implemented in
2008-09 with an allocation of Rs.348 crore. Priority to those areas that have not
been beneficiaries of watershed development schemes.
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! Centrally Sponsored Scheme on Micro Irrigation: Rs.500 crore being allocated in
2008-09 with a target of covering 400,000 hectare.
! Water bodies: Agreements for a total sum of US$738 million signed with the World
Bank by the Governments of Tamil Nadu, Andhra Pradesh and Karnataka to repair,
renovate and restore water bodies. Similar agreements to be signed between the
World Bank and the Governments of Orissa, West Bengal and some other States.
! Irrigation and Water Resources Finance Corporation: 14 irrigation projects
approved as National Projects by Government; Irrigation and Water Resources
Finance Corporation (IWRFC) proposed to be set up with initial capital of Rs.100
crore contributed by the Central Government, to fund long-gestation major and
medium irrigation projects.
! National Horticulture Mission (NHM): NHM covering 340 districts in 18 States
and two Union Territories, provided Rs.1,100 crore in 2008-09.
! Soil testing: 500 soil testing laboratories to be set up during the Eleventh Plan with
Government assistance of Rs.30 lakh per laboratory; one-time allocation of Rs.75
crore to the Ministry of Agriculture in order to provide one fully-fitted mobile soil
testing laboratory each to 250 districts of the country.
! Plantation Crops: Special Purpose Tea Fund for re-plantation and rejuvenation to
be provided Rs.40 crore in 2008-09; similar support to cardamom, rubber and coffee;
crop insurance scheme for tea, rubber, tobacco, chilli, ginger, turmeric, pepper and
cardamom to be introduced.
! National Plant Protection Training Institute at Hyderabad to be converted and
upgraded into an autonomous National Institute of Plant Health Management.
! Crop Insurance: National Agriculture Insurance Scheme (NAIS) to be continued
in its present form for Kharif and Rabi 2008-09. Rs.644 crore provided for the
scheme.
! Weather Based Crop Insurance Scheme implemented as a pilot scheme in selected
areas of five States to be continued; Rs.50 crore provided for this purpose in 2008-09.
! Subsidy for Fertilizers: Government to continue to provide fertilisers to farmers at
subsidized prices; Proposals to move to a nutrient based subsidy regime and
alternative methods of delivery being examined.
! Cooperative Credit Structure: Prof. Vaidyanathan Committee's report on reviving
the short-term cooperative credit structure under implementation in 17 states.
Rs. 1185 crore has been released so far by the Central Government to four States.
Central Government and State Government have reached an agreement to implement
the report on reviving the long term cooperative credit structure. Central
Government’s share will be Rs. 2,642 crore or 86 per cent of the total burden.
! Scheme of Debt Waiver and Debt Relief for farmers:
" Scheme to cover all loans disbursed by scheduled commercial banks, regional
rural banks and cooperative credit institutions up to March 31, 2007 and
overdue as on December 31, 2007 are covered under the scheme;
" Complete waiver of all loans that were overdue on December 31, 2007 and
which remained unpaid until February 29, 2008 for marginal farmers and
small farmers;
" one time settlement (OTS) scheme in respect of other farmers for all loans
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that were overdue on December 31, 2007 and which remained unpaid until
February 29, 2008; Rebate of 25 per cent against payment of the balance of
75 per cent under OTS;
" Agricultural loans restructured and rescheduled by banks in 2004 and 2006
through special packages also eligible, either for a waiver or an OTS on the
same pattern;
" Implementation of the debt waiver and debt relief scheme to be completed
by June 30, 2008; Farmers availing the relief would be entitled to fresh
agricultural loans from banks in accordance with normal rules.
" About 3 crore small and marginal farmers and about one crore other farmers
to benefit from the scheme; Total value of overdue loans being waived
estimated at Rs.50,000 crore and the OTS relief estimated at Rs.10,000 crore.
INVESTMENT, INFRASTRUCTURE, INDUSTRY AND TRADE
! Saving rate and investment rate estimated to be 35.6 per cent and 36.3 per cent,
respectively, by the end of 2007-08; between April- December 2007-2008. FDI
amounted to US$ 12.7 billion and FII to US$ 18 billion.
! Support to Central Public Sector Enterprises (CPSEs): Government to provide
Rs.16,436 crore as equity support and Rs.3,003 crore as loans to CPSEs in 2008-
09; 44 CPSEs listed as on date; Government policy is to list more CPSEs in order
to unlock their true value and improve corporate governance.
Rural Infrastructure Development Fund
! Corpus of RIDF-XIV to be raised in 2008-09 to Rs.14,000 crore, with a separate
window for rural roads.
Manufacturing Sector
! Growth in capital goods still very high at 20.2 per cent. Goal to take manufacturing
growth rate to double digit through more reforms.
Power
! Against Eleventh Plan target for additional power generation capacity of 78,577
MW Commercial Operation Date (COD) on about 10,000 MW to be achieved by
end March 2008.
! Ultra Mega Power Project (UMPP): Fourth UMPP at Tilaiya to be awarded shortly;
Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five
more UMPPs to the bidding stage by extending the required support.
! Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan
period with a capital subsidy of Rs.28,000 crore; allocation of Rs.5,500 crore for
2008-09.
! Accelerated Power Development and Reforms Project: Rs.800 crore to be provided
in 2008-09, A National Fund for transmission and distribution reform to be created.
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Roads
! National Highway Development Programme (NHDP): Allocation for NHDP
enhanced to Rs.12,966 crore in 2008-09 from Rs.10,867 crore in 2007-08;
Completion rate in the Golden Quadrilateral is 96.48 per cent and in the North
South, East West Corridor project is 23.36 per cent; Special attention being paid to
SARDP-NE; programme devised for the North Eastern region; 180 kms of roads
completed in 2007-08 and 300 kms. of road targetted for completion in 2008-09.
Oil and Gas
! Seventh round of bidding under the New Exploration Licensing Policy; bids invited
for 57 exploration blocks; estimated to attract investment of the order of US$3.5
billion to US$8 billion for exploration and discovery.
Coal
! 53 coal blocks with reserves of 13,842 million tonnes allotted during April-January
2007-08 to Government and private sector companies; new Coal Distribution Policy
notified in October 2007; coal regulator to be appointed.
Information Technology
! Allocation to the Department of Information Technology enhanced to Rs.1,680
crore in 2008-09 from Rs.1,500 crore in 2007-08; Two Schemes for establishing
100,000 broadband internet-enabled Common Service Centres in rural areas and
State Wide Area Networks (SWAN) with Central assistance under implementation;
new scheme for State Data Centres also approved; Rs.75 crore provided for the
common service centres; Rs.450 crore provided for SWAN and Rs.275 crore for
the State Data Centres.
Textiles
! Schemes for Integrated Textile Parks (SITP) and the Technology Upgradation Fund
(TUF) to be continued in the Eleventh Plan period; Provision for SITP being
maintained at Rs.450 crore in 2008-09; Provision for TUF to be increased to
Rs.1,090 crore in 2008-09 from Rs.911 crore in 2007-08.
! Handloom sector: 250 clusters being developed and 443 yarn banks established
under the cluster approach to the development of the handloom sector; Over 17
lakh families of weavers to be covered under the health insurance scheme by March
2008; Allocation being increased to Rs.340 crore in 2008-09; Infrastructure and
production being scaled up by taking up six centres for development as megaclusters;
Varanasi and Sibsagar to be taken up for handlooms, Bhiwandi and Erode
for powerlooms, and Narsapur and Moradabad for handicrafts; Each mega-cluster
to require about Rs.70 crore; Initial provision of Rs.100 crore made in 2008-09.
Micro, Small and Medium Enterprises
! A risk capital fund being created in the Small Industries and Development Bank of
India (SIDBI); Credit Guarantee Trust with SIDBI had extended guarantees to
89,129 units for an amount of Rs.2,479 crore as on January 31, 2008; SIDBI to
reduce the guarantee fee from 1.5 per cent to 1 per cent and the annual service fee
from 0.75 per cent to 0.5 per cent for loans up to Rs.5 lakhs.
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Foreign Trade
! Relief given to exporters in three tranches amounting to over Rs.8,000 crore; Interest
cost of sterilization through market stabilization bonds (MSS), which is in a sense,
subsidy to the export sector, estimated at Rs.8,351 crore for the year 2007-08.
FINANCIAL SECTOR
! Financial Inclusion: Two recommendations of the Committee on Financial Inclusion
proposed to be accepted viz (i) to advise commercial banks, including RRBs, to
add at least 250 rural household accounts every year at each of their rural and
semi-urban branches; and (ii) to allow individuals such as retired bank officers,
ex-servicemen etc to be appointed as business facilitator or business correspondent
or credit counselor; banks to be encouraged to embrace concept of Total Financial
Inclusion; Government to request all scheduled commercial banks to follow the
example set by some public sector banks and meet the entire credit requirements
of SHG members, namely, income generation activities, social needs like housing,
education, marriage etc., and debt swapping.
! (i) Fund of Rs.5,000 crore to be created in NABARD to enhance its refinance
operations to short term cooperative credit institutions;
(ii) Two funds of Rs.2,000 crore each to be created in SIDBI - one for risk capital
financing and other for enhancing refinance capability to the MSME sector.
(iii) Fund of Rs.1,200 crore to be created in NHB to enhance its refinance operations
in the rural housing sector.
These funds are to be governed by the general guidelines that are now applicable
to RIDF with some modifications.
! Differential Rate of Interest (DRI) scheme: Borrower's eligibility criteria for loan
under the DRI scheme to the weaker sections of the community engaged in gainful
occupations enhanced.
Capital Markets
! Measures to expand the market for corporate bonds: Exchange-traded currency
and interest rate futures to be launched and transparent credit derivatives market to
be developed with appropriate safeguards; Tradability of domestic convertible bonds
to be enhanced through the mechanism of enabling investors to separate the
embedded equity option from the convertible bond, and trade it separately;
Development of a market-based system for classifying financial instruments based
on their complexity and implicit risks to be encouraged.
! Permanent Account Number (PAN): Requirement of PAN extended to all
transactions in the financial market subject to suitable threshold exemption limits.
! National market for securities: Empowered Committee of State Finance Ministers
to be requested to work with the Central Government to create pan Indian market
for securities that will expand the market base and enhance the revenues of the
State Governments.
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OTHER PROPOSALS
! Skill Development Mission: A non-profit corporation to be established with the
entrusted mission to address the challenge of imparting the skills required by a
growing economy; Rs.15,000 crore proposed to be garnered as capital from
Governments, public and private sector, and bilateral/multilateral sources;
Government's equity in the proposed non-profit corporation to be Rs.1,000 crore
to begin with.
! Industrial Training Institutes: 238 ITIs being upgraded under the World Bank
assisted scheme; Under the PPP scheme, 309 ITIs have been identified in 29 States
with corresponding industry partners and agreements signed in 244 cases; Rs.750
crore set apart in 2008-09 in anticipation of upgrading 300 more ITIs.
! Sainik Schools: Rs.44 crore allocated to the 22 Sainik Schools at the rate of Rs.2
crore each, for immediate improvement of infrastructure including classrooms,
laboratories, libraries and facilities for physical education.
! Public Distribution System: Rs.32,667 crore being provided next year for food
subsidy under PDS and other welfare programmes; State of Haryana and the Union
Territory of Chandigarh to introduce, on a pilot basis, a smart card based delivery
system to deliver food grains under the PDS.
! Unorganised Sector Workers: In anticipation of the Unorganised Sector Workers'
Social Security Bill, 2007 being made into law, three schemes designed to provide
social security to workers in unorganised sector in a phased manner introduced;
(i) Aam Admi Bima Yojana to provide insurance cover to poor households; in the
first year of the Yojana, LIC to cover one crore landless households by September
30, 2008; Rs.1,500 crore placed with LIC; Additional sum of Rs.1,000 crore to be
placed with LIC in 2008-09 to cover another one crore poor households in the
second year;
(ii) Rashtriya Swasthya Bima Yojana to be implemented with effect from April 1,
2008; Indira Gandhi National Old Age Pension Scheme enlarged with effect from
November 19, 2007 to include all persons over 65 years falling under the BPL
category expanding beneficiary cover from 87 lakh to 157 lakh; Rs. 3,443 crore
being allocated in 2008-09 as against Rs.2,392 crore in 2007-08.
! Housing for the Poor: 41.13 lakh houses constructed up to December 2007 under
Indira Awas Yojana (IAY) against a target of 60 lakh houses; Cumulative number
of houses constructed under IAY to be 51.77 lakh by end March 2008; Subsidy per
unit in respect of new houses sanctioned after April 1, 2008 to be enhanced from
Rs.25,000 to Rs.35,000 in plain areas and from Rs.27,500 to Rs.38,500 in hill/
difficult areas to reflect the higher cost of construction; Subsidy for upgradation of
houses to be increased from Rs.12,500 per unit to Rs.15,000; Public sector banks
to be advised to include IAY houses under the differential rate of interest (DRI)
scheme and lend up to Rs.20,000 per unit at an interest rate of 4 per cent.
! Defence: Allocation for Defence to be increased by 10 per cent from Rs.96,000
crore to Rs.105,600 crore.
! Backward Regions Grant Fund: Allocation for 2008-09 kept at same level as current
year at Rs.5,800 crore; 45 per cent of the amount likely to be allocated to the States
of Bihar, Orissa and Uttar Pradesh.
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! Climate Change: Permanent institutional mechanism to be established for
development and coordination role in exploration and implementation of ideas.
! Sixth Central Pay Commission: to submit its report by March 31, 2008.
! Commonwealth Games: to be provided Rs.624 crore in 2008-09.
! Institutions of Excellence: Special grant of Rs.100 crore awarded to three institutions
of excellence for 2008-09
(i) Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra;
(ii) University of Mysore, Mysore; and
(iii) Delhi University, Delhi.
! India's Soft Power: Rs.75 crore grant to Indian Council of Cultural Relations to
design and implement a programme to achieve the objective of projecting the 'soft
power' of India in music, literature, dance, art, cuisine and especially films.
! Tiger Protection: One time grant of Rs.50 crore to the National Tiger Conservation
Authority to redouble efforts to protect the tiger; Bulk of grant to be used to raise,
arm and deploy a special Tiger Protection Force.
! Monitoring and Evaluation: Central Plan Schemes' Monitoring System (CPSMS)
to be put in place and implemented as Plan scheme; a comprehensive Decision
Support System and Management Information System also to be established to
generate and monitor scheme-wise and State-wise releases for about 1,000 Central
Plan and centrally sponsored schemes in 2008-09; Concurrent evaluation started
by some ministries to be supplemented by independent evaluations conducted by
research institutions.
BUDGET ESTIMATES
! Plan Expenditure estimated at Rs.243,386 crore.
! Non-Plan Expenditure estimated at Rs.507,499 crore.
! Revenue deficit for 2007-08 to be 1.4 per cent (against a BE of 1.5 per cent) and
the fiscal deficit to be 3.1 per cent (against a BE of 3.3 per cent); Revenue receipts
of Central Government for 2008-09 projected at Rs.602, 935 crore and revenue
expenditure at Rs.658,119 crore; Revenue deficit for 2008-09 estimated at Rs.55,184
crore, which amounts to 1.0 per cent of GDP; Fiscal deficit for 2008-09 estimated
at Rs.133,287 crore which is 2.5 per cent of GDP; elimination of Revenue Deficit
may need one more year; because of the conscious shift in expenditure in favour of
health, education and the social sector.
! Thirteenth Finance Commission to be requested to revisit the roadmap for fiscal
adjustment and suggest a suitably revised roadmap, after the obligations on
account of the Sixth Central Pay Commission become clear.
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TAX PROPOSALS
! Tax to GDP ratio that was 9.2 per cent in 2003-04, set to rise to 12.5 per cent at the
end of 2007-08.
! Set to achieve the Budget Estimates of indirect taxes and exceed the Budget
Estimates of direct taxes.
Indirect Taxes
Customs duties
! No change in the peak rate of customs duty.
! Customs duty on Project Imports to reduce from 7.5 per cent to 5 per cent; 4 per
cent special CVD to be imposed on a few specified projects in the power sector.
! Customs duty being reduced on steel melting scrap and aluminium scrap from 5
per cent to nil.
! Customs duty to be reduced from 10 per cent to 5 per cent on certain specified life
saving drugs and on the bulk drugs used for the manufacture of such drugs. They
are also being exempted from excise duty or countervailing duty.
! Customs duty is being reduced on vitamin premixes and mineral mixtures from 30
per cent to 20 per cent and on phosphoric acid from 7.5 per cent to 5 per cent to
reduce cost of manufacture of dairy and poultry feeds
! Customs duty being reduced on bactofuges from 7.5 per cent to nil for the benefit
of dairy industry and to increase shelf life of milk
! Specified parts of set top boxes and specified raw materials for use in the IT/
electronic hardware industry to be exempted from customs duty.
! Customs duty on convergence products to be reduced from 10 per cent to 5 per
cent to establish parity between devices used in the information/ communication
sector and the entertainment sector
! Customs duty being reduced on specified machinery from 7.5 per cent to 5 per cent
to provide fillip to the manufacture of sports goods; duty also being exempted on
specified raw materials for sports goods.
! Customs duty to be exempted on rough cubic zirconia and being reduced on polished
cubic zirconia from 10 per cent to 5 per cent, in order to encourage value addition
and exports by gem and jewellery industry; Customs duty on rough coral being
reduced from 10 per cent to 5 per cent.
! Customs duty removed on helicopter simulators to facilitate training of helicopter
pilots
! Customs duty reduced on crude and unrefined sulphur from 5 per cent to 2 per
cent, in order to support domestic fertiliser production
! Customs duty exemption is proposed to be withdrawn on naphtha for use in the
manufacture of polymers in order to correct price distortions and revenue losses.
Naphtha for use in the manufacture of polymers will be subjected to normal rate of
5 per cent. Naphtha imported for the production of fertilisers will continue to be
exempt from import duty.
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! Export duty on chrome being increased from Rs.2,000 per metric tonne to Rs.3,000
per metric tonne in order to conserve and make it available for value added
manufacture in India.
Excise duty
! General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give
a stimulus to the manufacturing sector.
! Excise duty on all goods produced in the pharmaceutical sector reduced from 16
per cent to 8 per cent.
! Excise duty reduced on buses and their chassis from 16 per cent to 12 per cent.
! Excise duty reduced on small cars from 16 per cent to 12 per cent and on hybrid
cars from 24 per cent to the general revised rate of 14 per cent.
! Excise duty reduced on two wheelers and three wheelers from 16 per cent to
12 per cent.
! Excise duty to be reduced on paper, paper board and articles made therefrom
manufactured out of non-conventional raw materials by units not having an attached
bamboo/wood pulp making plant from 12 per cent to 8 per cent with a further
reduction on clearances up to 3,500 MT from 8 per cent to nil. Excise duty on
certain varieties of writing, printing and packing paper is to be reduced from 12
per cent to 8 per cent.
! Excise duty is to be reduced from 16 per cent to nil on a few mass consumption
items including composting machines, wireless data cards, packaged coconut water,
tea and coffee mixes, and puffed rice.
! Excise duty reduction from 16 per cent to 8 per cent on a few more items including
water purification devices, veneers and flush doors, sterile dressing pads etc,.
specified packaging material and breakfast cereals.
! Anti AIDS drug, Atazanavir, as well as bulk drugs for its manufacture are to be
exempted from excise duty.
! Excise duty being exempted on end-use basis, on refrigeration equipment (consisting
of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration)
utilising power of 50 KW and above.
! Excise duty rates on bulk cement and packaged cement brought on par; bulk cement
to attract excise duty of Rs.400 per Metric Tonne or 14 per cent ad valorem,
whichever is higher; cement clinkers excise duty at Rs.450 per Metric Tonne.
! Excise duty being increased on packaged software from 8 per cent to 12 per cent,
bringing at par with customised software attracting a service tax of 12 per cent.
! Excise duty on both filter and non-filter cigarettes brought on par by applying
higher rates on non-filter cigarettes.
! Ad valorem part of the excise duty on unbranded petrol and unbranded diesel being
abolished and replaced by an equivalent specific duty of Rs.1.35 per litre; there
will be only a specific duty of Rs.14.35 per litre on unbranded petrol and Rs.4.60
per litre on unbranded diesel; there will be no impact on retail prices.
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! NCCD of 1 per cent removed on polyester filament yarn and the levy shifted to
cellular mobile phones.
Service tax
! Four services brought under service tax net namely, asset management service
provided under ULIP, services provided by stock/commodity exchanges and clearing
houses; right to use goods, in cases where VAT is not payable; and customised
software, to bring it on par with packaged software and other IT services.
! Threshold limit of exemption for small service providers increased from Rs.8 lakhs
per year to Rs.10 lakh per year; about 65,000 small service providers go out of the
tax net.
Direct Taxes
! Threshold limit of exemption from personal income tax in the case of all assesses
increased to Rs.150,000. The slabs and rates of tax are :
Up to Rs.150,000 NIL
Rs.150,001 to Rs.300,000 10 per cent
Rs.300,001 to Rs.500,000 20 per cent
Rs.500,001 and above 30 per cent
! In case of a woman assessee, the threshold limit increased from Rs.145,000 to
Rs.180,000; for a senior citizens, the threshold limit increased from Rs.195,000 to
Rs.225,000.
! No change in the corporate income tax rates.
! No change in the rate of surcharge.
! Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account
added to the basket of saving instruments under Section 80C of the Income Tax
Act.
! Additional deduction of Rs.15,000 allowed under Section 80D to an individual
paying medical insurance premium for his/her parent or parents.
! Income Tax Act to be amended to provide that reverse mortgage would not amount
to "transfer"; and the stream of revenue received by the senior citizen would not be
"income".
! Tax income arising from saplings or seedlings grown in a nursery exempted.
! Business of production of seeds and manufacture of agricultural implements added
to the list of companies allowed weighted deduction of 150 per cent on any
expenditure on in-house scientific research.
! Benefit of amortisation of certain preliminary expenses under Section 35D allowed
to assessees in the services sector.
! Corporate debt instruments issued in demat form and listed on recognised stock
exchanges exempted from TDS.
! Crèche facilities, sponsorship of an employee-sportsperson, organising sports events
for employees and guest houses excluded from the purview of FBT.
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! Parent company allowed to set off the dividend received from its subsidiary company
against dividend distributed by the parent company; provided that the dividend
received has suffered DDT and the parent company is not a subsidiary of
another company.
! Insert a new sub-section (11C) in Section 80-IB to grant a five year tax holiday to
hospitals located in any place outside the urban agglomerations especially in tier-
2 and tier-3 towns; this window will be open for the period April 1, 2008 to March
31, 2013.
! Five year holiday from income tax being granted to two, three or four star hotels
established in specified districts having UNESCO-declared 'World Heritage Sites';
the hotel should be constructed and start functioning during the period
April 1, 2008 to March 31, 2013.
! Coir Board included in Section 10(29A) and exempted from income tax.
! Rate of tax on short term capital gains under Section 111A & Section 115AD
increased to 15 per cent.
! STT paid to be treated like any other deductible expenditure against business income;
Levy of STT, in the case of options to be only on premium, where the option is not
exercised; liability to be on the seller; where the option is exercised, levy to be on
the settlement price and the liability on the buyer; no change in the present rates.
! Commodities Transaction Tax (CTT) to be introduced on the same lines as STT on
options and futures.
! Law being amended to exclude entities carrying on regular trade, commerce or
business or providing services in relation to any trade, commerce or business and
earning incomes from claiming that their purposes also fall under "charitable
purpose"; Genuine charitable organisations not to be affected in any way.
! Banking Cash Transaction Tax (BCTT) being withdrawn with effect from
April 1, 2009.
CST and a Roadmap towards GST
! Central Sales Tax rate being reduced from 3 per cent to 2 per cent from
April 1, 2008.
! Roadmap for Goods and Service Tax being prepared for introduction of GST from
April 1, 2010.
! The Gross Domestic Product increased by 7.5 per cent, 9.4 per cent and 9.6 percent
in first three years, of the UPA Government resulting in an unprecedented average
growth rate of 8.8 per cent. The drivers of growth continue to be 'services' and
'manufacturing' which are estimated to grow at 10.7 per cent and 9.4 per cent
respectively.
! Growth rate in agriculture for 2007-08 is estimated at 2.6 per cent.
! Food grain production in 2007-08, estimated at 219.32 million tonnes-an all time
record. Rice production at 94.08 million tonnes, maize at 16.78 million tonnes,
soya bean at 9.45 million tonnes, cotton at 23.38 million bales each, an all time
record.
! Rashtriya Krishi Vikas Yojana launched with an outlay of Rs. 25,000 crore, National
Food Security Mission with an outlay of Rs. 4,882 crore under National Policy for
Farmers in the Eleventh Five Year Plan.
THE GROWTH STORY : FASTER AND MORE INCLUSIVE
! Agricultural credit poised to reach Rs. 2,40,000 crore by March, 2008.
! 11.4 crore children covered under Mid Day Meal Scheme, the largest school lunch
programme in the world.
! Under National Rural Health Mission 8,756 primary health centres have been made
24x7 .
! 1,82,000 girls enrolled in residential schools under Kasturba Gandhi Balika
Vidyalaya Scheme.
BHARAT NIRMAN
! Bharat Nirman has made impressive progress in 2007-08 with 290 habitations
provided with drinking water each day, 17 habitations connected through all weather
road, 52 villages provided telephones, 42 villages electrified & 4,113 rural houses
completed each day.
ELEVENTH FIVE YEAR PLAN: THE CRUCIAL SECOND YEAR
! GBS 2008-09 at Rs.2,43,386 crore higher by Rs. 38,286 crore over 2007-08. Central
Plan allocation at Rs.1,79,954 crore, an increase of 16 percent over 2007-08; Bharat
Nirman to get Rs. 31,280 crore.
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! Sarva Shiksha Abhiyan (SSA): Sarva Shiksha Abhiyan provided Rs.13,100 crore
with the focus to shift from access and infrastructure at the primary level to enhancing
retention and improving quality of learning. Mid-day Meal to get Rs. 8,000 crore;
secondary education to get Rs. 4,554 crore.
! Jawahar Navodaya Vidyalaya : Rs. 130 crore provided in 2008-09, to establish
Navodaya Vidyalaya in 20 districts having large concentration of Scheduled Castes
& Scheduled Tribes.
! Kasturba Gandhi Balika Vidyalaya: Funds (as part of SSA) provided for additional
410 Vidyalayas in educationally backward areas. Rs. 80 crore allocated to set up
new or upgrade existing hostels attached to Balika Vidyalaya.
! National Means-cum-Merit Scholarship: Rs. 750 crore allocated to build up a corpus
of Rs.3,000 crore in four years. 1,00,000 Scholarship to be awarded beginning
2008-09.
! Nehru Yuva Kendra: Rs. 10 crore allocated in 2008-09 to set up a Kendra in 123
districts, and to cover recurring expenditure in the first year.
! Mid Day Meal Scheme: Extended to upper primary classes in Government and
Government aided schools in all blocks which will benefit 2.5 crore children taking
the total number of children covered under the scheme to 13.9 crore.
! Institutes of Higher Education: India to become a knowledge society, three IISERs
at Mohali, Pune and Kolkata; and an IIIT at Kanchipuram have started
functioning.Government to set up 16 Central Universities in each of the hitherto
uncovered states; three IITs in Andhra Pradesh, Bihar and Rajasthan; two IISERs
at Bhopal and Tiruvananthapuram; and two Schools of Planning and Architecture
at Bhopal and Vijayawada: Rs. 5 crore grant provided to Deccan College, Postgraduate
and Research Institute, Pune.
! Science and Technology: Rs.85 crore allocated for Innovation in Science Pursuit
for Inspired Research (INSPIRE); which will include scholarships for young learners
(10-17 years), scholarships for continuing science education (17-22 years) and
opportunities for research careers (22-32 years); Rs. 100 crore provided for
establishing the National Knowledge Network.
! Health Sector: Rs.16,534 crore allocated, for the sector marking an increase of
15% over 2007-08.
National Rural Health Mission (NRHM): 462,000 Associated Social Health
Activitists have been trained, 177,924 villages have sanitation committees functional
and 323 district Hospitals have been taken up for upgradation. Allocation to NRHM
has been increased to Rs. 12,050 crore.
! HIV/AIDS: The National Aids Control Programme provided Rs.993 crore.
! Polio: Drive to eradicate polio continues with revised strategy and focus on the
high risk districts in Uttar Pradesh and Bihar. Rs. 1,042 crore allocated in 2008-09.
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! Rashtriya Swasthya Bima Yojana : Rashtriya Swasthya Bima Yojana to provide
health cover of Rs.30,000 for every worker in the unorganised sector falling under
the BPL category and his/her family. The Yojana will be launched in Delhi and in
the States of Haryana and Rajasthan on April 1, 2008. Rs.205 crore provided as the
Centre's share of the premia in 2008-09.
! National Programme for the Elderly: National Programme for the Elderly to be
started in 2008-09 with a Plan outlay of Rs.400 crore. Two National Institutes of
Ageing, eight regional centres, and a department for geriatric medical care in one
medical college/tertiary level hospital in each State to be established during the
Eleventh Plan period.
! Integrated Child Development Services (ICDS): Allocation for ICDS enhanced
from Rs.5,293 crore in 2007-08 to Rs.6,300 crore in 2008-09; Remuneration of
Anganwadi workers being increased from Rs.1,000 per month to Rs.1,500 per
month; remuneration of Anganwadi Helpers increased from Rs.500 per month to
Rs.750 per month; over 18 lakh Anganwadi workers and helpers to benefit; 5,959
ICDS projects and 932,000 Anganwadi and mini-Anganwadi centres functional
under ICDS at the end of December 2007.
Flagship Programmes
! National Rural Employment Guarantee Scheme (NREGS): NREGS to be rolled
out to all 596 rural districts in India with provision of Rs.16,000 crore; More money
will be provided to meet the legal guarantee of employment as demand rises.
! Jawaharlal Nehru National Urban Renewal Mission (JNNURM): Allocation for
JNNURM increased to Rs.6,866 crore in 2008-09 from Rs.5,482 crore in 2007-08.
! Rajiv Gandhi Drinking Water Mission: Allocation for Rajiv Gandhi Drinking Water
Mission enhanced to Rs.7,300 crore in 2008-09 as against Rs.6,500 crore in
2007-08;
! Total Sanitation Campaign to be provided Rs.1,200 crore in 2008-09.
! Desalination Plant near Chennai: Rs.300 crore in 2008-09 for a desalination plant
near Chennai to be set up under public private partnership.
! North Eastern Region (NER): Ministry of Development of North Eastern Region
to be provided Rs. 1,455 crore. Including this amount, total Budget allocation for
NER, to increase to Rs.16,447 crore in 2008-09 from Rs.14,365 crore in 2007-08.
! Development and Finance Corporations: Additional equity contributions proposed
for National Minorities Development and Finance Corporation Rs. 75.00 crore,
National Finance and Development Corporations for weaker sections
comprising Safai Karamcharis, Scheduled Castes and Backward Classes. Rs. 106.50
crore, National/State Scheduled Tribes Finance and Development Corporations
Rs. 50.00 crore, National Handicapped Development Corporation Rs. 9.00 crore.
! Scholarships: Pre- and post-matric scholarship programmes announced in previous
Budgets for SC, ST, OBC and minorities to get further funds in 2008-09: Scheduled
Castes (Rs.804 crore), Scheduled Tribes (Rs.195 crore), Other Backward Classes
(Rs.164 crore) and Minorities (post-matric) (Rs.100 crore).
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! Rajiv Gandhi National Fellowship Programme supporting SC and ST students
pursuing M.Phil and PhD courses allocated Rs.75 crore in 2008-09.
! Minorities: Allocation to the Ministry of Minority Affairs increased from Rs.500
crore in 2007-08 to Rs.1,000 crore in 2008-09; Report of the Justice Rajindar
Sachar Committee taken up for speedy implementation.
Women and Children
! Rs, 11,460 crore has been provided for 100% women specific programmes and
Rs. 16,202 crore for schemes where at least 30 per cent allocation is for women
specified programmes.
! Allocation for Ministry of Women and Child Development enhanced by 24% to
Rs. 7,200 crore in 2008-09.
Self Help Groups
! Life Insurance Corporation of India being asked to scale up Janashree Bima Yojana
scheme to cover all women self help groups that are credit-linked to the banks; of
Rs. 500 crore proposed to be contributed to the corpus of the Social Security Fund
with annual contributions to be made as the scheme is scaled up.
Supplement to GBS:
! Rs.8,365 crore provided as additional funds for Plan 'B' through two supplementaries
in 2007-08; additional resources to the tune of Rs.10,000 crore to be mobilized
under Plan 'B' for Plan Capital expenditure in 2008-09 also.
Agricultural Credit:
! Growth of agricultural credit set to exceed target set for 2007-08. For 2008-09,
target set at Rs.280,000 crore, with short-term crop loans continued to be disbursed
at 7 per cent per annum; initial provision of Rs.1,600 crore made for interest
subvention in 2008-09.
Investment in Agriculture:
! Gross Capital Formation (GCF) in agriculture as a proportion of GDP in the
agriculture sector improves from a low of 10.2 per cent in 2003-04 to 12.5 per cent
in 2006-07; Target to raise it to 16 per cent during the Eleventh Plan to achieve the
growth rate of 4 per cent.
Water Resources:
! Accelerated Irrigation Benefit Programme (AIBP): 24 major and medium irrigation
projects and 753 minor irrigation schemes to be completed in 2007-08, creating
additional irrigation potential of 500,000 hectare; Outlay for 2008-09 increased to
Rs. 20,000 crore, from Rs.11,000 crore in 2007-08.
! Rainfed Area Development Programme finalised and to be implemented in
2008-09 with an allocation of Rs.348 crore. Priority to those areas that have not
been beneficiaries of watershed development schemes.
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! Centrally Sponsored Scheme on Micro Irrigation: Rs.500 crore being allocated in
2008-09 with a target of covering 400,000 hectare.
! Water bodies: Agreements for a total sum of US$738 million signed with the World
Bank by the Governments of Tamil Nadu, Andhra Pradesh and Karnataka to repair,
renovate and restore water bodies. Similar agreements to be signed between the
World Bank and the Governments of Orissa, West Bengal and some other States.
! Irrigation and Water Resources Finance Corporation: 14 irrigation projects
approved as National Projects by Government; Irrigation and Water Resources
Finance Corporation (IWRFC) proposed to be set up with initial capital of Rs.100
crore contributed by the Central Government, to fund long-gestation major and
medium irrigation projects.
! National Horticulture Mission (NHM): NHM covering 340 districts in 18 States
and two Union Territories, provided Rs.1,100 crore in 2008-09.
! Soil testing: 500 soil testing laboratories to be set up during the Eleventh Plan with
Government assistance of Rs.30 lakh per laboratory; one-time allocation of Rs.75
crore to the Ministry of Agriculture in order to provide one fully-fitted mobile soil
testing laboratory each to 250 districts of the country.
! Plantation Crops: Special Purpose Tea Fund for re-plantation and rejuvenation to
be provided Rs.40 crore in 2008-09; similar support to cardamom, rubber and coffee;
crop insurance scheme for tea, rubber, tobacco, chilli, ginger, turmeric, pepper and
cardamom to be introduced.
! National Plant Protection Training Institute at Hyderabad to be converted and
upgraded into an autonomous National Institute of Plant Health Management.
! Crop Insurance: National Agriculture Insurance Scheme (NAIS) to be continued
in its present form for Kharif and Rabi 2008-09. Rs.644 crore provided for the
scheme.
! Weather Based Crop Insurance Scheme implemented as a pilot scheme in selected
areas of five States to be continued; Rs.50 crore provided for this purpose in 2008-09.
! Subsidy for Fertilizers: Government to continue to provide fertilisers to farmers at
subsidized prices; Proposals to move to a nutrient based subsidy regime and
alternative methods of delivery being examined.
! Cooperative Credit Structure: Prof. Vaidyanathan Committee's report on reviving
the short-term cooperative credit structure under implementation in 17 states.
Rs. 1185 crore has been released so far by the Central Government to four States.
Central Government and State Government have reached an agreement to implement
the report on reviving the long term cooperative credit structure. Central
Government’s share will be Rs. 2,642 crore or 86 per cent of the total burden.
! Scheme of Debt Waiver and Debt Relief for farmers:
" Scheme to cover all loans disbursed by scheduled commercial banks, regional
rural banks and cooperative credit institutions up to March 31, 2007 and
overdue as on December 31, 2007 are covered under the scheme;
" Complete waiver of all loans that were overdue on December 31, 2007 and
which remained unpaid until February 29, 2008 for marginal farmers and
small farmers;
" one time settlement (OTS) scheme in respect of other farmers for all loans
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that were overdue on December 31, 2007 and which remained unpaid until
February 29, 2008; Rebate of 25 per cent against payment of the balance of
75 per cent under OTS;
" Agricultural loans restructured and rescheduled by banks in 2004 and 2006
through special packages also eligible, either for a waiver or an OTS on the
same pattern;
" Implementation of the debt waiver and debt relief scheme to be completed
by June 30, 2008; Farmers availing the relief would be entitled to fresh
agricultural loans from banks in accordance with normal rules.
" About 3 crore small and marginal farmers and about one crore other farmers
to benefit from the scheme; Total value of overdue loans being waived
estimated at Rs.50,000 crore and the OTS relief estimated at Rs.10,000 crore.
INVESTMENT, INFRASTRUCTURE, INDUSTRY AND TRADE
! Saving rate and investment rate estimated to be 35.6 per cent and 36.3 per cent,
respectively, by the end of 2007-08; between April- December 2007-2008. FDI
amounted to US$ 12.7 billion and FII to US$ 18 billion.
! Support to Central Public Sector Enterprises (CPSEs): Government to provide
Rs.16,436 crore as equity support and Rs.3,003 crore as loans to CPSEs in 2008-
09; 44 CPSEs listed as on date; Government policy is to list more CPSEs in order
to unlock their true value and improve corporate governance.
Rural Infrastructure Development Fund
! Corpus of RIDF-XIV to be raised in 2008-09 to Rs.14,000 crore, with a separate
window for rural roads.
Manufacturing Sector
! Growth in capital goods still very high at 20.2 per cent. Goal to take manufacturing
growth rate to double digit through more reforms.
Power
! Against Eleventh Plan target for additional power generation capacity of 78,577
MW Commercial Operation Date (COD) on about 10,000 MW to be achieved by
end March 2008.
! Ultra Mega Power Project (UMPP): Fourth UMPP at Tilaiya to be awarded shortly;
Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five
more UMPPs to the bidding stage by extending the required support.
! Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan
period with a capital subsidy of Rs.28,000 crore; allocation of Rs.5,500 crore for
2008-09.
! Accelerated Power Development and Reforms Project: Rs.800 crore to be provided
in 2008-09, A National Fund for transmission and distribution reform to be created.
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Roads
! National Highway Development Programme (NHDP): Allocation for NHDP
enhanced to Rs.12,966 crore in 2008-09 from Rs.10,867 crore in 2007-08;
Completion rate in the Golden Quadrilateral is 96.48 per cent and in the North
South, East West Corridor project is 23.36 per cent; Special attention being paid to
SARDP-NE; programme devised for the North Eastern region; 180 kms of roads
completed in 2007-08 and 300 kms. of road targetted for completion in 2008-09.
Oil and Gas
! Seventh round of bidding under the New Exploration Licensing Policy; bids invited
for 57 exploration blocks; estimated to attract investment of the order of US$3.5
billion to US$8 billion for exploration and discovery.
Coal
! 53 coal blocks with reserves of 13,842 million tonnes allotted during April-January
2007-08 to Government and private sector companies; new Coal Distribution Policy
notified in October 2007; coal regulator to be appointed.
Information Technology
! Allocation to the Department of Information Technology enhanced to Rs.1,680
crore in 2008-09 from Rs.1,500 crore in 2007-08; Two Schemes for establishing
100,000 broadband internet-enabled Common Service Centres in rural areas and
State Wide Area Networks (SWAN) with Central assistance under implementation;
new scheme for State Data Centres also approved; Rs.75 crore provided for the
common service centres; Rs.450 crore provided for SWAN and Rs.275 crore for
the State Data Centres.
Textiles
! Schemes for Integrated Textile Parks (SITP) and the Technology Upgradation Fund
(TUF) to be continued in the Eleventh Plan period; Provision for SITP being
maintained at Rs.450 crore in 2008-09; Provision for TUF to be increased to
Rs.1,090 crore in 2008-09 from Rs.911 crore in 2007-08.
! Handloom sector: 250 clusters being developed and 443 yarn banks established
under the cluster approach to the development of the handloom sector; Over 17
lakh families of weavers to be covered under the health insurance scheme by March
2008; Allocation being increased to Rs.340 crore in 2008-09; Infrastructure and
production being scaled up by taking up six centres for development as megaclusters;
Varanasi and Sibsagar to be taken up for handlooms, Bhiwandi and Erode
for powerlooms, and Narsapur and Moradabad for handicrafts; Each mega-cluster
to require about Rs.70 crore; Initial provision of Rs.100 crore made in 2008-09.
Micro, Small and Medium Enterprises
! A risk capital fund being created in the Small Industries and Development Bank of
India (SIDBI); Credit Guarantee Trust with SIDBI had extended guarantees to
89,129 units for an amount of Rs.2,479 crore as on January 31, 2008; SIDBI to
reduce the guarantee fee from 1.5 per cent to 1 per cent and the annual service fee
from 0.75 per cent to 0.5 per cent for loans up to Rs.5 lakhs.
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Foreign Trade
! Relief given to exporters in three tranches amounting to over Rs.8,000 crore; Interest
cost of sterilization through market stabilization bonds (MSS), which is in a sense,
subsidy to the export sector, estimated at Rs.8,351 crore for the year 2007-08.
FINANCIAL SECTOR
! Financial Inclusion: Two recommendations of the Committee on Financial Inclusion
proposed to be accepted viz (i) to advise commercial banks, including RRBs, to
add at least 250 rural household accounts every year at each of their rural and
semi-urban branches; and (ii) to allow individuals such as retired bank officers,
ex-servicemen etc to be appointed as business facilitator or business correspondent
or credit counselor; banks to be encouraged to embrace concept of Total Financial
Inclusion; Government to request all scheduled commercial banks to follow the
example set by some public sector banks and meet the entire credit requirements
of SHG members, namely, income generation activities, social needs like housing,
education, marriage etc., and debt swapping.
! (i) Fund of Rs.5,000 crore to be created in NABARD to enhance its refinance
operations to short term cooperative credit institutions;
(ii) Two funds of Rs.2,000 crore each to be created in SIDBI - one for risk capital
financing and other for enhancing refinance capability to the MSME sector.
(iii) Fund of Rs.1,200 crore to be created in NHB to enhance its refinance operations
in the rural housing sector.
These funds are to be governed by the general guidelines that are now applicable
to RIDF with some modifications.
! Differential Rate of Interest (DRI) scheme: Borrower's eligibility criteria for loan
under the DRI scheme to the weaker sections of the community engaged in gainful
occupations enhanced.
Capital Markets
! Measures to expand the market for corporate bonds: Exchange-traded currency
and interest rate futures to be launched and transparent credit derivatives market to
be developed with appropriate safeguards; Tradability of domestic convertible bonds
to be enhanced through the mechanism of enabling investors to separate the
embedded equity option from the convertible bond, and trade it separately;
Development of a market-based system for classifying financial instruments based
on their complexity and implicit risks to be encouraged.
! Permanent Account Number (PAN): Requirement of PAN extended to all
transactions in the financial market subject to suitable threshold exemption limits.
! National market for securities: Empowered Committee of State Finance Ministers
to be requested to work with the Central Government to create pan Indian market
for securities that will expand the market base and enhance the revenues of the
State Governments.
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OTHER PROPOSALS
! Skill Development Mission: A non-profit corporation to be established with the
entrusted mission to address the challenge of imparting the skills required by a
growing economy; Rs.15,000 crore proposed to be garnered as capital from
Governments, public and private sector, and bilateral/multilateral sources;
Government's equity in the proposed non-profit corporation to be Rs.1,000 crore
to begin with.
! Industrial Training Institutes: 238 ITIs being upgraded under the World Bank
assisted scheme; Under the PPP scheme, 309 ITIs have been identified in 29 States
with corresponding industry partners and agreements signed in 244 cases; Rs.750
crore set apart in 2008-09 in anticipation of upgrading 300 more ITIs.
! Sainik Schools: Rs.44 crore allocated to the 22 Sainik Schools at the rate of Rs.2
crore each, for immediate improvement of infrastructure including classrooms,
laboratories, libraries and facilities for physical education.
! Public Distribution System: Rs.32,667 crore being provided next year for food
subsidy under PDS and other welfare programmes; State of Haryana and the Union
Territory of Chandigarh to introduce, on a pilot basis, a smart card based delivery
system to deliver food grains under the PDS.
! Unorganised Sector Workers: In anticipation of the Unorganised Sector Workers'
Social Security Bill, 2007 being made into law, three schemes designed to provide
social security to workers in unorganised sector in a phased manner introduced;
(i) Aam Admi Bima Yojana to provide insurance cover to poor households; in the
first year of the Yojana, LIC to cover one crore landless households by September
30, 2008; Rs.1,500 crore placed with LIC; Additional sum of Rs.1,000 crore to be
placed with LIC in 2008-09 to cover another one crore poor households in the
second year;
(ii) Rashtriya Swasthya Bima Yojana to be implemented with effect from April 1,
2008; Indira Gandhi National Old Age Pension Scheme enlarged with effect from
November 19, 2007 to include all persons over 65 years falling under the BPL
category expanding beneficiary cover from 87 lakh to 157 lakh; Rs. 3,443 crore
being allocated in 2008-09 as against Rs.2,392 crore in 2007-08.
! Housing for the Poor: 41.13 lakh houses constructed up to December 2007 under
Indira Awas Yojana (IAY) against a target of 60 lakh houses; Cumulative number
of houses constructed under IAY to be 51.77 lakh by end March 2008; Subsidy per
unit in respect of new houses sanctioned after April 1, 2008 to be enhanced from
Rs.25,000 to Rs.35,000 in plain areas and from Rs.27,500 to Rs.38,500 in hill/
difficult areas to reflect the higher cost of construction; Subsidy for upgradation of
houses to be increased from Rs.12,500 per unit to Rs.15,000; Public sector banks
to be advised to include IAY houses under the differential rate of interest (DRI)
scheme and lend up to Rs.20,000 per unit at an interest rate of 4 per cent.
! Defence: Allocation for Defence to be increased by 10 per cent from Rs.96,000
crore to Rs.105,600 crore.
! Backward Regions Grant Fund: Allocation for 2008-09 kept at same level as current
year at Rs.5,800 crore; 45 per cent of the amount likely to be allocated to the States
of Bihar, Orissa and Uttar Pradesh.
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! Climate Change: Permanent institutional mechanism to be established for
development and coordination role in exploration and implementation of ideas.
! Sixth Central Pay Commission: to submit its report by March 31, 2008.
! Commonwealth Games: to be provided Rs.624 crore in 2008-09.
! Institutions of Excellence: Special grant of Rs.100 crore awarded to three institutions
of excellence for 2008-09
(i) Mahatma Phule Krishi Vidyapeeth, Rahuri, Maharashtra;
(ii) University of Mysore, Mysore; and
(iii) Delhi University, Delhi.
! India's Soft Power: Rs.75 crore grant to Indian Council of Cultural Relations to
design and implement a programme to achieve the objective of projecting the 'soft
power' of India in music, literature, dance, art, cuisine and especially films.
! Tiger Protection: One time grant of Rs.50 crore to the National Tiger Conservation
Authority to redouble efforts to protect the tiger; Bulk of grant to be used to raise,
arm and deploy a special Tiger Protection Force.
! Monitoring and Evaluation: Central Plan Schemes' Monitoring System (CPSMS)
to be put in place and implemented as Plan scheme; a comprehensive Decision
Support System and Management Information System also to be established to
generate and monitor scheme-wise and State-wise releases for about 1,000 Central
Plan and centrally sponsored schemes in 2008-09; Concurrent evaluation started
by some ministries to be supplemented by independent evaluations conducted by
research institutions.
BUDGET ESTIMATES
! Plan Expenditure estimated at Rs.243,386 crore.
! Non-Plan Expenditure estimated at Rs.507,499 crore.
! Revenue deficit for 2007-08 to be 1.4 per cent (against a BE of 1.5 per cent) and
the fiscal deficit to be 3.1 per cent (against a BE of 3.3 per cent); Revenue receipts
of Central Government for 2008-09 projected at Rs.602, 935 crore and revenue
expenditure at Rs.658,119 crore; Revenue deficit for 2008-09 estimated at Rs.55,184
crore, which amounts to 1.0 per cent of GDP; Fiscal deficit for 2008-09 estimated
at Rs.133,287 crore which is 2.5 per cent of GDP; elimination of Revenue Deficit
may need one more year; because of the conscious shift in expenditure in favour of
health, education and the social sector.
! Thirteenth Finance Commission to be requested to revisit the roadmap for fiscal
adjustment and suggest a suitably revised roadmap, after the obligations on
account of the Sixth Central Pay Commission become clear.
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TAX PROPOSALS
! Tax to GDP ratio that was 9.2 per cent in 2003-04, set to rise to 12.5 per cent at the
end of 2007-08.
! Set to achieve the Budget Estimates of indirect taxes and exceed the Budget
Estimates of direct taxes.
Indirect Taxes
Customs duties
! No change in the peak rate of customs duty.
! Customs duty on Project Imports to reduce from 7.5 per cent to 5 per cent; 4 per
cent special CVD to be imposed on a few specified projects in the power sector.
! Customs duty being reduced on steel melting scrap and aluminium scrap from 5
per cent to nil.
! Customs duty to be reduced from 10 per cent to 5 per cent on certain specified life
saving drugs and on the bulk drugs used for the manufacture of such drugs. They
are also being exempted from excise duty or countervailing duty.
! Customs duty is being reduced on vitamin premixes and mineral mixtures from 30
per cent to 20 per cent and on phosphoric acid from 7.5 per cent to 5 per cent to
reduce cost of manufacture of dairy and poultry feeds
! Customs duty being reduced on bactofuges from 7.5 per cent to nil for the benefit
of dairy industry and to increase shelf life of milk
! Specified parts of set top boxes and specified raw materials for use in the IT/
electronic hardware industry to be exempted from customs duty.
! Customs duty on convergence products to be reduced from 10 per cent to 5 per
cent to establish parity between devices used in the information/ communication
sector and the entertainment sector
! Customs duty being reduced on specified machinery from 7.5 per cent to 5 per cent
to provide fillip to the manufacture of sports goods; duty also being exempted on
specified raw materials for sports goods.
! Customs duty to be exempted on rough cubic zirconia and being reduced on polished
cubic zirconia from 10 per cent to 5 per cent, in order to encourage value addition
and exports by gem and jewellery industry; Customs duty on rough coral being
reduced from 10 per cent to 5 per cent.
! Customs duty removed on helicopter simulators to facilitate training of helicopter
pilots
! Customs duty reduced on crude and unrefined sulphur from 5 per cent to 2 per
cent, in order to support domestic fertiliser production
! Customs duty exemption is proposed to be withdrawn on naphtha for use in the
manufacture of polymers in order to correct price distortions and revenue losses.
Naphtha for use in the manufacture of polymers will be subjected to normal rate of
5 per cent. Naphtha imported for the production of fertilisers will continue to be
exempt from import duty.
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! Export duty on chrome being increased from Rs.2,000 per metric tonne to Rs.3,000
per metric tonne in order to conserve and make it available for value added
manufacture in India.
Excise duty
! General CENVAT rate on all goods reduced from 16 per cent to 14 per cent to give
a stimulus to the manufacturing sector.
! Excise duty on all goods produced in the pharmaceutical sector reduced from 16
per cent to 8 per cent.
! Excise duty reduced on buses and their chassis from 16 per cent to 12 per cent.
! Excise duty reduced on small cars from 16 per cent to 12 per cent and on hybrid
cars from 24 per cent to the general revised rate of 14 per cent.
! Excise duty reduced on two wheelers and three wheelers from 16 per cent to
12 per cent.
! Excise duty to be reduced on paper, paper board and articles made therefrom
manufactured out of non-conventional raw materials by units not having an attached
bamboo/wood pulp making plant from 12 per cent to 8 per cent with a further
reduction on clearances up to 3,500 MT from 8 per cent to nil. Excise duty on
certain varieties of writing, printing and packing paper is to be reduced from 12
per cent to 8 per cent.
! Excise duty is to be reduced from 16 per cent to nil on a few mass consumption
items including composting machines, wireless data cards, packaged coconut water,
tea and coffee mixes, and puffed rice.
! Excise duty reduction from 16 per cent to 8 per cent on a few more items including
water purification devices, veneers and flush doors, sterile dressing pads etc,.
specified packaging material and breakfast cereals.
! Anti AIDS drug, Atazanavir, as well as bulk drugs for its manufacture are to be
exempted from excise duty.
! Excise duty being exempted on end-use basis, on refrigeration equipment (consisting
of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration)
utilising power of 50 KW and above.
! Excise duty rates on bulk cement and packaged cement brought on par; bulk cement
to attract excise duty of Rs.400 per Metric Tonne or 14 per cent ad valorem,
whichever is higher; cement clinkers excise duty at Rs.450 per Metric Tonne.
! Excise duty being increased on packaged software from 8 per cent to 12 per cent,
bringing at par with customised software attracting a service tax of 12 per cent.
! Excise duty on both filter and non-filter cigarettes brought on par by applying
higher rates on non-filter cigarettes.
! Ad valorem part of the excise duty on unbranded petrol and unbranded diesel being
abolished and replaced by an equivalent specific duty of Rs.1.35 per litre; there
will be only a specific duty of Rs.14.35 per litre on unbranded petrol and Rs.4.60
per litre on unbranded diesel; there will be no impact on retail prices.
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! NCCD of 1 per cent removed on polyester filament yarn and the levy shifted to
cellular mobile phones.
Service tax
! Four services brought under service tax net namely, asset management service
provided under ULIP, services provided by stock/commodity exchanges and clearing
houses; right to use goods, in cases where VAT is not payable; and customised
software, to bring it on par with packaged software and other IT services.
! Threshold limit of exemption for small service providers increased from Rs.8 lakhs
per year to Rs.10 lakh per year; about 65,000 small service providers go out of the
tax net.
Direct Taxes
! Threshold limit of exemption from personal income tax in the case of all assesses
increased to Rs.150,000. The slabs and rates of tax are :
Up to Rs.150,000 NIL
Rs.150,001 to Rs.300,000 10 per cent
Rs.300,001 to Rs.500,000 20 per cent
Rs.500,001 and above 30 per cent
! In case of a woman assessee, the threshold limit increased from Rs.145,000 to
Rs.180,000; for a senior citizens, the threshold limit increased from Rs.195,000 to
Rs.225,000.
! No change in the corporate income tax rates.
! No change in the rate of surcharge.
! Senior Citizen Saving Scheme 2004 and the Post Office Time Deposit Account
added to the basket of saving instruments under Section 80C of the Income Tax
Act.
! Additional deduction of Rs.15,000 allowed under Section 80D to an individual
paying medical insurance premium for his/her parent or parents.
! Income Tax Act to be amended to provide that reverse mortgage would not amount
to "transfer"; and the stream of revenue received by the senior citizen would not be
"income".
! Tax income arising from saplings or seedlings grown in a nursery exempted.
! Business of production of seeds and manufacture of agricultural implements added
to the list of companies allowed weighted deduction of 150 per cent on any
expenditure on in-house scientific research.
! Benefit of amortisation of certain preliminary expenses under Section 35D allowed
to assessees in the services sector.
! Corporate debt instruments issued in demat form and listed on recognised stock
exchanges exempted from TDS.
! Crèche facilities, sponsorship of an employee-sportsperson, organising sports events
for employees and guest houses excluded from the purview of FBT.
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! Parent company allowed to set off the dividend received from its subsidiary company
against dividend distributed by the parent company; provided that the dividend
received has suffered DDT and the parent company is not a subsidiary of
another company.
! Insert a new sub-section (11C) in Section 80-IB to grant a five year tax holiday to
hospitals located in any place outside the urban agglomerations especially in tier-
2 and tier-3 towns; this window will be open for the period April 1, 2008 to March
31, 2013.
! Five year holiday from income tax being granted to two, three or four star hotels
established in specified districts having UNESCO-declared 'World Heritage Sites';
the hotel should be constructed and start functioning during the period
April 1, 2008 to March 31, 2013.
! Coir Board included in Section 10(29A) and exempted from income tax.
! Rate of tax on short term capital gains under Section 111A & Section 115AD
increased to 15 per cent.
! STT paid to be treated like any other deductible expenditure against business income;
Levy of STT, in the case of options to be only on premium, where the option is not
exercised; liability to be on the seller; where the option is exercised, levy to be on
the settlement price and the liability on the buyer; no change in the present rates.
! Commodities Transaction Tax (CTT) to be introduced on the same lines as STT on
options and futures.
! Law being amended to exclude entities carrying on regular trade, commerce or
business or providing services in relation to any trade, commerce or business and
earning incomes from claiming that their purposes also fall under "charitable
purpose"; Genuine charitable organisations not to be affected in any way.
! Banking Cash Transaction Tax (BCTT) being withdrawn with effect from
April 1, 2009.
CST and a Roadmap towards GST
! Central Sales Tax rate being reduced from 3 per cent to 2 per cent from
April 1, 2008.
! Roadmap for Goods and Service Tax being prepared for introduction of GST from
April 1, 2010.
Wednesday, February 27, 2008
News
* Simplex Casting has bagged a good order from Indian Railways for supply of coco bogies taking its total order book position to over Rs.130 cr. Accumulate at declines.
TOWER TALK
* Some serious accumulation is on in Jupiter Bioscience as it closed 4% higher with decent volumes at a time when the Sensex is down by more than 400 points.
* Royal Orchid Hotels has entered a joint venture with the Parsvnath group to develop ten hotels at an investment of Rs.500 cr. Scrip is available fairly cheap and is a good bet at the current level.
* Although marketmen have turned bullish on Reliance Power on the bonus announcement, investors may do well to exit this scrip and shift to better options like Numeric Power, Indo Asian Fusegear, Easun Reyrolle, ICSA, KLG Systel, Asian Electronics etc.
* Vakrangee Software has held out in the recent carnage. It seems the scrip is in stronger hands and may shoot up sharply once the sentiment improves. A solid bet.
* Centurion Bank of Punjab is a good buy because of its merger proposal with HDFC Bank.
* Bihar Tubes has planned aggressive expansion by inorganic growth. A good stock to accumulate at declines.
* Bodal Chemicals is quoting at a single digit P/E and has a rights issue which is like a mini bonus. The share is languishing at Rs.93 and offers rights at Rs.10 premium. Record date is in March 2008.
* Will the bonus in Reliance Power change the mood of the market? Next week is crucial for the direction of the market.
* Himachal Futuristic is to be rechristened as Dynamic Infotel Ltd. and is likely to reduce its equity capital to offset heavy losses. A scrip to watch in coming years.
* Reliance’s gas find in the Krishna Godavri deepwater blocks will be a real money spinner for RIL.
* Elder Healthcare joins the trimming game with Vandana Luthra.
* Essar Shipping with its refocus on offshore is a great scrip in the making.
* Crompton Greaves, BHEL, Siemens and ABB are in for a stupendous rise in the capital goods segment.
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* TVS Motors’ electric scooters for Rs.32,500 from will give Hero Honda, Bajaj Auto and Kinetic a tough time.
* Jain Irrigation Systems’ tie-up with Mekorot Water Co. from Israel for hydro infra projects will add a new dimension to its growth.
* Jaiprakash Associates’ ad campaign empowers its scrip. Around Rs.230, it offers a great opportunity for long-term investors.
* Kohinoor Broadcasting Corp. plans to launch KBC News, its Hindi News Channel by 15th April.
* Ennore Coke will start heating the metallurgical coke (metcoke) plant mid-March with production scheduled in the first week of April. The way metcoke prices are shooting up, the scrip is sure to head northward.
* The grey market premium on Rural Electrification Corporation has shot up to Rs.22/24.
TOWER TALK
* Some serious accumulation is on in Jupiter Bioscience as it closed 4% higher with decent volumes at a time when the Sensex is down by more than 400 points.
* Royal Orchid Hotels has entered a joint venture with the Parsvnath group to develop ten hotels at an investment of Rs.500 cr. Scrip is available fairly cheap and is a good bet at the current level.
* Although marketmen have turned bullish on Reliance Power on the bonus announcement, investors may do well to exit this scrip and shift to better options like Numeric Power, Indo Asian Fusegear, Easun Reyrolle, ICSA, KLG Systel, Asian Electronics etc.
* Vakrangee Software has held out in the recent carnage. It seems the scrip is in stronger hands and may shoot up sharply once the sentiment improves. A solid bet.
* Centurion Bank of Punjab is a good buy because of its merger proposal with HDFC Bank.
* Bihar Tubes has planned aggressive expansion by inorganic growth. A good stock to accumulate at declines.
* Bodal Chemicals is quoting at a single digit P/E and has a rights issue which is like a mini bonus. The share is languishing at Rs.93 and offers rights at Rs.10 premium. Record date is in March 2008.
* Will the bonus in Reliance Power change the mood of the market? Next week is crucial for the direction of the market.
* Himachal Futuristic is to be rechristened as Dynamic Infotel Ltd. and is likely to reduce its equity capital to offset heavy losses. A scrip to watch in coming years.
* Reliance’s gas find in the Krishna Godavri deepwater blocks will be a real money spinner for RIL.
* Elder Healthcare joins the trimming game with Vandana Luthra.
* Essar Shipping with its refocus on offshore is a great scrip in the making.
* Crompton Greaves, BHEL, Siemens and ABB are in for a stupendous rise in the capital goods segment.
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* TVS Motors’ electric scooters for Rs.32,500 from will give Hero Honda, Bajaj Auto and Kinetic a tough time.
* Jain Irrigation Systems’ tie-up with Mekorot Water Co. from Israel for hydro infra projects will add a new dimension to its growth.
* Jaiprakash Associates’ ad campaign empowers its scrip. Around Rs.230, it offers a great opportunity for long-term investors.
* Kohinoor Broadcasting Corp. plans to launch KBC News, its Hindi News Channel by 15th April.
* Ennore Coke will start heating the metallurgical coke (metcoke) plant mid-March with production scheduled in the first week of April. The way metcoke prices are shooting up, the scrip is sure to head northward.
* The grey market premium on Rural Electrification Corporation has shot up to Rs.22/24.
Pepper
Pepper: Skyrocketing on good export enquiries
Pepper price is to keep its bullish run in coming days on increase export enquiries...
Pepper price is to keep its bullish run in coming days on increase export enquiries...
Tuesday, February 26, 2008
BHEL bags order for 350MW power plant
New Delhi, Feb 26: Power equipment supplier Bharat Heavy Electricals Ltd on Tuesday has bagged a Rs 1,075 crore order for setting up a 350MW power plant in Gujarat.
Gujarat State Energy Generation Ltd has placed the engineering, procurement and construction order for the gas turbine-based combined cycle power plant to be installed at Hazira in Gujarat, BHEL said in a statement.
The project is slated for completion in 27 months, the company said.
Scope of work for the project includes supply and commissioning of a gas turbine generator set, one steam turbine generator set and heat recovery steam generator along with associated auxiliaries.
The gas turbine would be manufactured at BHEL's Hyderabad plant, while the HRSG would be supplied by the company's Trichy plant.
The company had recently won a similar contract from Reliance Industries for setting up a 345 MW gas turbine-based combined cycle power plant at Nagothane in Maharashtra.
Bureau Report
Gujarat State Energy Generation Ltd has placed the engineering, procurement and construction order for the gas turbine-based combined cycle power plant to be installed at Hazira in Gujarat, BHEL said in a statement.
The project is slated for completion in 27 months, the company said.
Scope of work for the project includes supply and commissioning of a gas turbine generator set, one steam turbine generator set and heat recovery steam generator along with associated auxiliaries.
The gas turbine would be manufactured at BHEL's Hyderabad plant, while the HRSG would be supplied by the company's Trichy plant.
The company had recently won a similar contract from Reliance Industries for setting up a 345 MW gas turbine-based combined cycle power plant at Nagothane in Maharashtra.
Bureau Report
Stocks impacted by the Railway Budget
It was Lalu’s last lap (fifth Railway Budget) which saw strong thrust on technology and infrastructure. Stocks from steel, technology, capital goods and infrastructure stocks saw some positive impact.
50 big terminals are being planned in Mumbai, Pune, Gaziabad. Concor will set up 8 depots,which saw the stock move up. The Railway Budget sees annual steel traffic aim of 200 mt in 2011 versus 120 mt now, which saw steel SAIL gaining over 2%. 25-30 tonne axle load trains to be started.
Budget sees strong revenues coming from comoditiy transportation. FY08 coal freight loading seen at 336 mt. The budget has also planned 200 mt tariff from cement in 2011-12. SPV for links to Mundra, Kandla, Krishnapatnam ports. The budget has an ambitious plan to set up 20,000 km high density network. It plans to upgrade infrastructure in 7 years at Rs 75,000 crore.
The budget sees excess freight loading target of 310 mt in next 4 years. To up auto ticket sale machines to 6,000 in 2 years. The Budget plans to produce only stainless steel coaches after FY10. It also plans for new coaches in all Shatabdi trains by 2011. It plans to start making steel coaches from FY09. It also plans new coaches in all rajdhani trains by 2010.
Clear thrust was seen on technology; TCS, Wipro, Satyam were up on account of IT upgradation order. The budget will have online control of trains in 2 years. It plans to link trains via software communication by 2009. It plans to start ticket confirmation via mobile phones. The Budet is planning 'smart card' based ticket system. SMART CARDS will benefit Bartronics.
The other measures to be positively impact stocks are automated signalling to benefit Kernex Micro. ETA display in long-run trains to benefit Mic Electronics. CCTV, metal detectors installation is expected to benefit Zicom . Anti-fire protection to benefit Nitin Fire Protection.
50 big terminals are being planned in Mumbai, Pune, Gaziabad. Concor will set up 8 depots,which saw the stock move up. The Railway Budget sees annual steel traffic aim of 200 mt in 2011 versus 120 mt now, which saw steel SAIL gaining over 2%. 25-30 tonne axle load trains to be started.
Budget sees strong revenues coming from comoditiy transportation. FY08 coal freight loading seen at 336 mt. The budget has also planned 200 mt tariff from cement in 2011-12. SPV for links to Mundra, Kandla, Krishnapatnam ports. The budget has an ambitious plan to set up 20,000 km high density network. It plans to upgrade infrastructure in 7 years at Rs 75,000 crore.
The budget sees excess freight loading target of 310 mt in next 4 years. To up auto ticket sale machines to 6,000 in 2 years. The Budget plans to produce only stainless steel coaches after FY10. It also plans for new coaches in all Shatabdi trains by 2011. It plans to start making steel coaches from FY09. It also plans new coaches in all rajdhani trains by 2010.
Clear thrust was seen on technology; TCS, Wipro, Satyam were up on account of IT upgradation order. The budget will have online control of trains in 2 years. It plans to link trains via software communication by 2009. It plans to start ticket confirmation via mobile phones. The Budet is planning 'smart card' based ticket system. SMART CARDS will benefit Bartronics.
The other measures to be positively impact stocks are automated signalling to benefit Kernex Micro. ETA display in long-run trains to benefit Mic Electronics. CCTV, metal detectors installation is expected to benefit Zicom . Anti-fire protection to benefit Nitin Fire Protection.
inflation
The troika of-government spending, Chindia, and a bullish supply/demand dynamic-give you the impression that inflation may well and truly take off in 2008.
In January Australian investors sold stocks and wiped over $170 billion from the share market. America sneezed and the ASX got blown over. What's worse, inflation in America is rising at the fastest rate in 17 years. It is far from over, something wicked this way comes...
Yet if you look past the shocking figures and negative sentiment, there's good reason to believe that 2008 may be kind to Australia's epic resource boom. There is one simple reason why, which I'll explain in a moment. But here's the important thing...
If I am right and we are quickly entering a new and volatile phase in the global economy...you can still make money from resource shares.
The bad news is that the easy money has already been made. But the good news is that the biggest money may still be out there. Let me explain...
From Gloom to Boom
Beyond the bear market in credit and the collapse of the housing bubble...one theme will dominate in 2008: the rise of epic inflation.
If my forecast is correct, food and fuel prices will continue to rise. Inflation will bleed into other commodities...especially agricultural commodities and precious metals.
In January Australian investors sold stocks and wiped over $170 billion from the share market. America sneezed and the ASX got blown over. What's worse, inflation in America is rising at the fastest rate in 17 years. It is far from over, something wicked this way comes...
Yet if you look past the shocking figures and negative sentiment, there's good reason to believe that 2008 may be kind to Australia's epic resource boom. There is one simple reason why, which I'll explain in a moment. But here's the important thing...
If I am right and we are quickly entering a new and volatile phase in the global economy...you can still make money from resource shares.
The bad news is that the easy money has already been made. But the good news is that the biggest money may still be out there. Let me explain...
From Gloom to Boom
Beyond the bear market in credit and the collapse of the housing bubble...one theme will dominate in 2008: the rise of epic inflation.
If my forecast is correct, food and fuel prices will continue to rise. Inflation will bleed into other commodities...especially agricultural commodities and precious metals.
Thursday, February 21, 2008
RPL refinery achieves 82% overall progress in just two years
Reliance Petroleum Limited (“RPL”) has successfully
completed the second year of implementation of its complex refinery, coming up in a Special
Economic Zone at Jamnagar. RPL has achieved 82% overall progress in just 24 months
since commencement of the Project. Based on the progress so far, RPL is on course to
complete the project ahead of its initial schedule of December 2008.
During the quarter, project implementation gained further momentum and led to achievement
of several significant milestones, including the following;
• Engineering activities are nearing completion.
• Overall procurement progress exceeded 97%.
• More than 75% of equipments and tagged items already received at site.
• Deliveries of over dimensional cargos (ODC) and super ODCs are nearing completion.
• Over 40% of equipments have been erected; Project skyline changed dramatically.
• Overall construction progress crossed the 60% mark for the complex.
• Structural and pipe fabrication activities progressing at an accelerated pace.
• Sufficient site infrastructure mobilised to sustain equipment installation and fabrication
activities on the fast track.
During the quarter, the project engineering activities were completed with all drawings for
concreting, structural steel, underground piping as well as electrical and instrumentation
released for construction. Residual engineering activities to support ongoing construction are
continuing. Successful completion of this massive engineering effort in less than two years
has set a new global record in the refining sector. It also reflects the success of a team effort
that involved over 7,500 engineers, working from several interconnected locations across the
world.
The quarter witnessed near completion of procurement activities for the project as well. The
procurement and contracting for equipments, tagged items and bulk materials is now
complete. Equipment deliveries have gained enhanced momentum with over 3,800
equipments, including several ODCs and super heavy equipments, delivered at site already.
completed the second year of implementation of its complex refinery, coming up in a Special
Economic Zone at Jamnagar. RPL has achieved 82% overall progress in just 24 months
since commencement of the Project. Based on the progress so far, RPL is on course to
complete the project ahead of its initial schedule of December 2008.
During the quarter, project implementation gained further momentum and led to achievement
of several significant milestones, including the following;
• Engineering activities are nearing completion.
• Overall procurement progress exceeded 97%.
• More than 75% of equipments and tagged items already received at site.
• Deliveries of over dimensional cargos (ODC) and super ODCs are nearing completion.
• Over 40% of equipments have been erected; Project skyline changed dramatically.
• Overall construction progress crossed the 60% mark for the complex.
• Structural and pipe fabrication activities progressing at an accelerated pace.
• Sufficient site infrastructure mobilised to sustain equipment installation and fabrication
activities on the fast track.
During the quarter, the project engineering activities were completed with all drawings for
concreting, structural steel, underground piping as well as electrical and instrumentation
released for construction. Residual engineering activities to support ongoing construction are
continuing. Successful completion of this massive engineering effort in less than two years
has set a new global record in the refining sector. It also reflects the success of a team effort
that involved over 7,500 engineers, working from several interconnected locations across the
world.
The quarter witnessed near completion of procurement activities for the project as well. The
procurement and contracting for equipments, tagged items and bulk materials is now
complete. Equipment deliveries have gained enhanced momentum with over 3,800
equipments, including several ODCs and super heavy equipments, delivered at site already.
Gold
The correction from the April 2007 high in gold gave us an extraordinary opportunity last summer to accumulate mining shares while they were truly undervalued. Simplicity, our premier gold timing model, was the key. Nevertheless, gold and silver investments still remain all but undiscovered by the mainstream investment community.
The most underbelieved asset class today is precious metals, but they are beginning to gain serious investor attention again as gold moves to all-time highs over $850. The next major move is just beginning. Once the current rally takes a brief rest, gold will advance to at least $1,000 during 2008 on its way to eventually hitting $1,600.
Gold will soon become popular cocktail conversation as the mainstream begins to catch on.
This August, we received a rare buy signal from our gold timing model, “Simplicity.” The previous time Simplicity gave a buy signal was in May 2005 when gold was $440. The average annualized gain after Simplicity buy signals is 89.6% … and they say no one rings a bell!
The time is ripe again for precious metals.
Fundamentally, gold and silver couldn’t be more bullish. The U.S. dollar is weak; and as the dollar falls, gold will rise. That is cast in stone.
China (as I mentioned) is on a buying spree with billions of dollars in excess cash. To come up to speed with the rest of the central banking world, it is estimated they will need to purchase 2,000 to 3,000 tonnes of gold.
Although the mainstream has not warmed up to the metals yet, we are experiencing the third great gold bull market of the last 100 years. The first was from 1929 to 1932 where we saw the price of the average mining stock increase 650%. In the second, from 1969 to 1980, the typical mining stock appreciated by 1,000%.
The third secular bull market in gold is under way (it's far from over), yet the Philadelphia Gold and Silver Index (XAU) has but barely begun to perform. You will likely see the XAU double this year and appreciate 300% from current levels by the decade’s end.
The most underbelieved asset class today is precious metals, but they are beginning to gain serious investor attention again as gold moves to all-time highs over $850. The next major move is just beginning. Once the current rally takes a brief rest, gold will advance to at least $1,000 during 2008 on its way to eventually hitting $1,600.
Gold will soon become popular cocktail conversation as the mainstream begins to catch on.
This August, we received a rare buy signal from our gold timing model, “Simplicity.” The previous time Simplicity gave a buy signal was in May 2005 when gold was $440. The average annualized gain after Simplicity buy signals is 89.6% … and they say no one rings a bell!
The time is ripe again for precious metals.
Fundamentally, gold and silver couldn’t be more bullish. The U.S. dollar is weak; and as the dollar falls, gold will rise. That is cast in stone.
China (as I mentioned) is on a buying spree with billions of dollars in excess cash. To come up to speed with the rest of the central banking world, it is estimated they will need to purchase 2,000 to 3,000 tonnes of gold.
Although the mainstream has not warmed up to the metals yet, we are experiencing the third great gold bull market of the last 100 years. The first was from 1929 to 1932 where we saw the price of the average mining stock increase 650%. In the second, from 1969 to 1980, the typical mining stock appreciated by 1,000%.
The third secular bull market in gold is under way (it's far from over), yet the Philadelphia Gold and Silver Index (XAU) has but barely begun to perform. You will likely see the XAU double this year and appreciate 300% from current levels by the decade’s end.
Hexaware Technologies reports net loss of Rs 72.92 crore
Hexaware Technologies reports net loss of Rs 72.92 crore in the December
2007 quarter
Sales rise 18.54% to Rs 127.39 crore
Hexaware Technologies reported net loss of Rs 72.92 crore in the quarter
ended December 2007 as against net profit of Rs 42.82 crore during the
previous quarter ended December 2006. Sales rose 18.54% to Rs 127.39 crore
in the quarter ended December 2007 as against Rs 107.47 crore during the
previous quarter ended December 2006.
For the full year, net loss reported to Rs 10.76 crore in the year ended
December 2007 as against net profit of Rs 118.66 crore during the previous
year ended December 2006. Sales rose 13.60% to Rs 468.80 crore in the year
ended December 2007 as against Rs 412.69 crore during the previous year
ended December 2006.
CAPMKT
2007 quarter
Sales rise 18.54% to Rs 127.39 crore
Hexaware Technologies reported net loss of Rs 72.92 crore in the quarter
ended December 2007 as against net profit of Rs 42.82 crore during the
previous quarter ended December 2006. Sales rose 18.54% to Rs 127.39 crore
in the quarter ended December 2007 as against Rs 107.47 crore during the
previous quarter ended December 2006.
For the full year, net loss reported to Rs 10.76 crore in the year ended
December 2007 as against net profit of Rs 118.66 crore during the previous
year ended December 2006. Sales rose 13.60% to Rs 468.80 crore in the year
ended December 2007 as against Rs 412.69 crore during the previous year
ended December 2006.
CAPMKT
Platinum Goes Ballistic crosses $ 2174 an Ounce
Platinum Shines, Will Gold Follow Suit?
Natural resources markets exploded higher yesterday. Crude oil closed above the $100-a-barrel mark for the first time. And platinum's move was even more dramatic ... the price soared to a record high of $2,173!
Watching platinum has been like watching a missile take off. The metal's run-up has been nothing short of astonishing — 41% so far in 2008 and about 75% in the past 12 months!
And as high as platinum is right now, some analysts are now calling for the metal to hit $3,000 per ounce by the end of the year!
I think what's happening in platinum could be foreshadowing of what will soon happen to other precious metals like gold. More on that in a moment.
First ...
What's Driving Platinum?
That's the question traders and end users are asking themselves right now. Is this a short-term blowout or a long-term shift in pricing?
Robin Bhar, a respected metals analyst at UBS, recently summed up the dramatic move in platinum this way:
'It's panic, panic, panic. If you are a platinum
consumer, you are not going to sleep at night. The price move shows you the unprecedented nature of the market. People can see actual physical shortages somewhere down the road and prices moving away from them. It's not a case of just speculation. There is genuine demand coming through.'
Other analysts say the platinum deficit could widen to more than 400,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007. The market had a surplus of 65,000 ounces in 2006, following seven successive years of deficits. Inventories are at historically low levels.
There is no doubt that the supply/demand squeeze in platinum is real! Platinum prices are fueled by inelastic industrial demand as well as from investment demand. (Jewelry demand for platinum is pretty flat, and should go down as the price of the metal goes through the roof.
The industrial demand is for catalytic converters for diesel engines. Until very recently, platinum was the only metal that could be used for this purpose, and the number of diesel vehicles around the world is growing dramatically. In 2000, diesel accounted for only 18% of global production of light vehicles. By 2007, 24% of vehicles were diesels.
And while there is no platinum ETF in the U.S., there is one in Britain. The metal held by London-based ETFS Physical Platinum (PHPT on the London Stock Exchange) rose by 42,000 ounces in a week to 267,000 ounces — an 18% climb in just one week. If growth continues at half of this recent rate, then the ETF will hold a million ounces in the fourth quarter of 2008.
THAT is how you get to $3,000-an-ounce platinum!
There Is Also a Crisis
On the Supply Side
South Africa produces about 75% of the world's platinum, and it is in the grips of a power crisis that is punishing the mining industry.
The South African state power utility, Eskom, has to build enough power plants to keep up with South Africa's growing economy and increasingly plugged-in population.
Power demand has increased 50% since apartheid ended in 1994 as the government provided more homes with electricity.
South Africa is also boosting infrastructure spending on roads, railways and stadiums as it prepares to host the 2010 soccer World Cup.
As a result, Eskom is now chronically short about 1.5 gigawatts of electrical generation (about 1 and a half good-sized power plants). Eskom expects the power outages to continue until at least 2013.
Eskom's solution is rolling power outages that result in about a 25% national power outage per month. In practical terms, this is a forced reduction in power usage of 10% for big users like mines. The mines were completely shuttered for five days last month!
This means on those days, the mines are unable to pump excess ground water from deep shafts while other maintenance programs are cut back. And how would you like to be a miner caught underground when random power cuts hit, stopping elevators and bringing ventilation to a halt? That kind of brown-out could lead to a deadly accident.
Bottom line: South African platinum miners were ratcheting down their production forecasts anyway, and the power outages are hastening the slide.
Sure, a lot more platinum is being recovered from junked catalytic converters. And new advances in fuel technology should allow palladium to substitute for up to about 25% of the platinum used in catalysts for diesel-powered engines.
But neither of these developments is going to completely solve the platinum crunch anytime soon. So platinum prices could go much higher.
More importantly ...
This Supply/Demand Squeeze Shows
You How Quickly Metals Prices Can Soar!
Here's Why Gold Might Be Next in Line ...
If $2,000 platinum is rocking the markets, imagine how shocking $2,000 gold would be? Well, we might not have to wait too long to find out.
Because the fact is, like platinum, gold has longer-term supply/demand fundamentals that are very bullish, including ...
Global gold production fell to a 10-year low of 2,444 metric tonnes in 2007, according to Gold Fields Mineral Service. This year production will likely drop again. While China is producing more gold — up 12% — South Africa's output is falling off a cliff, down 8.1%.
Exchange traded funds that hold gold are an important new force in the market. The most active gold ETF, the streetTracks Gold Shares (GLD), held 630 tonnes of gold at the end of January — more than the European Central Bank or China's central bank. What's more, a new gold ETF in India is planned for this year, after 4 successful ETFs came into being in FY08.
The U.S. Federal Reserve is likely going to keep cutting interest rates. This in inherently inflationary — and inflation is bullish for gold. We're already seeing more inflation in the U.S., with producer and consumer prices skyrocketing. And now we're importing inflation from China. U.S. import prices reached a record high in January, up 1.7% — twice as much as had been expected.
The best part is that gold hasn't really taken off yet. Let me explain ...
Look at the chart I made. You can see that gold is consolidating after its most recent rally.
I expect we could see more consolidation before gold takes off, but, when it finally breaks out, it should rally and rally hard.
So rather than chase platinum, I would use this consolidation to add to gold positions in anticipation of their upside breakout. That way, you're in before any meteoric rise!
Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
Natural resources markets exploded higher yesterday. Crude oil closed above the $100-a-barrel mark for the first time. And platinum's move was even more dramatic ... the price soared to a record high of $2,173!
Watching platinum has been like watching a missile take off. The metal's run-up has been nothing short of astonishing — 41% so far in 2008 and about 75% in the past 12 months!
And as high as platinum is right now, some analysts are now calling for the metal to hit $3,000 per ounce by the end of the year!
I think what's happening in platinum could be foreshadowing of what will soon happen to other precious metals like gold. More on that in a moment.
First ...
What's Driving Platinum?
That's the question traders and end users are asking themselves right now. Is this a short-term blowout or a long-term shift in pricing?
Robin Bhar, a respected metals analyst at UBS, recently summed up the dramatic move in platinum this way:
'It's panic, panic, panic. If you are a platinum
consumer, you are not going to sleep at night. The price move shows you the unprecedented nature of the market. People can see actual physical shortages somewhere down the road and prices moving away from them. It's not a case of just speculation. There is genuine demand coming through.'
Other analysts say the platinum deficit could widen to more than 400,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007. The market had a surplus of 65,000 ounces in 2006, following seven successive years of deficits. Inventories are at historically low levels.
There is no doubt that the supply/demand squeeze in platinum is real! Platinum prices are fueled by inelastic industrial demand as well as from investment demand. (Jewelry demand for platinum is pretty flat, and should go down as the price of the metal goes through the roof.
The industrial demand is for catalytic converters for diesel engines. Until very recently, platinum was the only metal that could be used for this purpose, and the number of diesel vehicles around the world is growing dramatically. In 2000, diesel accounted for only 18% of global production of light vehicles. By 2007, 24% of vehicles were diesels.
And while there is no platinum ETF in the U.S., there is one in Britain. The metal held by London-based ETFS Physical Platinum (PHPT on the London Stock Exchange) rose by 42,000 ounces in a week to 267,000 ounces — an 18% climb in just one week. If growth continues at half of this recent rate, then the ETF will hold a million ounces in the fourth quarter of 2008.
THAT is how you get to $3,000-an-ounce platinum!
There Is Also a Crisis
On the Supply Side
South Africa produces about 75% of the world's platinum, and it is in the grips of a power crisis that is punishing the mining industry.
The South African state power utility, Eskom, has to build enough power plants to keep up with South Africa's growing economy and increasingly plugged-in population.
Power demand has increased 50% since apartheid ended in 1994 as the government provided more homes with electricity.
South Africa is also boosting infrastructure spending on roads, railways and stadiums as it prepares to host the 2010 soccer World Cup.
As a result, Eskom is now chronically short about 1.5 gigawatts of electrical generation (about 1 and a half good-sized power plants). Eskom expects the power outages to continue until at least 2013.
Eskom's solution is rolling power outages that result in about a 25% national power outage per month. In practical terms, this is a forced reduction in power usage of 10% for big users like mines. The mines were completely shuttered for five days last month!
This means on those days, the mines are unable to pump excess ground water from deep shafts while other maintenance programs are cut back. And how would you like to be a miner caught underground when random power cuts hit, stopping elevators and bringing ventilation to a halt? That kind of brown-out could lead to a deadly accident.
Bottom line: South African platinum miners were ratcheting down their production forecasts anyway, and the power outages are hastening the slide.
Sure, a lot more platinum is being recovered from junked catalytic converters. And new advances in fuel technology should allow palladium to substitute for up to about 25% of the platinum used in catalysts for diesel-powered engines.
But neither of these developments is going to completely solve the platinum crunch anytime soon. So platinum prices could go much higher.
More importantly ...
This Supply/Demand Squeeze Shows
You How Quickly Metals Prices Can Soar!
Here's Why Gold Might Be Next in Line ...
If $2,000 platinum is rocking the markets, imagine how shocking $2,000 gold would be? Well, we might not have to wait too long to find out.
Because the fact is, like platinum, gold has longer-term supply/demand fundamentals that are very bullish, including ...
Global gold production fell to a 10-year low of 2,444 metric tonnes in 2007, according to Gold Fields Mineral Service. This year production will likely drop again. While China is producing more gold — up 12% — South Africa's output is falling off a cliff, down 8.1%.
Exchange traded funds that hold gold are an important new force in the market. The most active gold ETF, the streetTracks Gold Shares (GLD), held 630 tonnes of gold at the end of January — more than the European Central Bank or China's central bank. What's more, a new gold ETF in India is planned for this year, after 4 successful ETFs came into being in FY08.
The U.S. Federal Reserve is likely going to keep cutting interest rates. This in inherently inflationary — and inflation is bullish for gold. We're already seeing more inflation in the U.S., with producer and consumer prices skyrocketing. And now we're importing inflation from China. U.S. import prices reached a record high in January, up 1.7% — twice as much as had been expected.
The best part is that gold hasn't really taken off yet. Let me explain ...
Look at the chart I made. You can see that gold is consolidating after its most recent rally.
I expect we could see more consolidation before gold takes off, but, when it finally breaks out, it should rally and rally hard.
So rather than chase platinum, I would use this consolidation to add to gold positions in anticipation of their upside breakout. That way, you're in before any meteoric rise!
Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
Refinery report
Govt to consider refinery project at Allahabad: Deora
Rae Bareli (UP), Feb 20: With the general elections approaching, the government will consider reviving the long pending project to set up a refinery at Allahabad in Uttar Pradesh.
"We will discuss the possibility of setting up of the refinery in the next one week and a decision will be taken," Petroleum Minister Murli Deora said at the foundation stone laying ceremony of Rajiv Gandhi Institute of Petroleum Technology here.
Bharat Petroleum Corporation Ltd had in early 1990s proposed to set up a six million tonne refinery at Allahabad to feed the northern market.
However, the project was put on cold storage with domestic refining capacity far exceeding the full demand in the country. Against a demand of 119 million tons of fuel in 2006-07, the refining capacity in the country was 147 million tons.
BPCL is also setting up a six million tonne refinery at Bina in Madhya Pradesh to feed the central and northern markets. The project is to be completed by 2011.
HPCL is also setting up a 9 million tonne refinery at Bhatinda in Punjab; to complete by 2011-12, that will make the northern region surplus in capacity.
Deora said the prospect of the refinery in Allahabad will be studied in the next one week and a decision will be taken based on the study.
Bureau Report
Rae Bareli (UP), Feb 20: With the general elections approaching, the government will consider reviving the long pending project to set up a refinery at Allahabad in Uttar Pradesh.
"We will discuss the possibility of setting up of the refinery in the next one week and a decision will be taken," Petroleum Minister Murli Deora said at the foundation stone laying ceremony of Rajiv Gandhi Institute of Petroleum Technology here.
Bharat Petroleum Corporation Ltd had in early 1990s proposed to set up a six million tonne refinery at Allahabad to feed the northern market.
However, the project was put on cold storage with domestic refining capacity far exceeding the full demand in the country. Against a demand of 119 million tons of fuel in 2006-07, the refining capacity in the country was 147 million tons.
BPCL is also setting up a six million tonne refinery at Bina in Madhya Pradesh to feed the central and northern markets. The project is to be completed by 2011.
HPCL is also setting up a 9 million tonne refinery at Bhatinda in Punjab; to complete by 2011-12, that will make the northern region surplus in capacity.
Deora said the prospect of the refinery in Allahabad will be studied in the next one week and a decision will be taken based on the study.
Bureau Report
41% rise in net direct tax collections
The Centre’s direct tax revenues continued to be buoyant, with collections during the period April 1, 2007 to February 15, 2008 recording 41.4 per cent increase to Rs 2,28,745 crore. This collection level constituted 85 per cent of the budgeted direct tax target of Rs 2,67,490 crore for 2007-08.
The strong growth in direct tax collections so far in the current fiscal has raised hope among taxpayers that the Finance Minister, Mr P Chidambaram, would moderate direct tax rates in the forthcoming budget.
While corporate tax collections grew 38.78 per cent for the period under review at Rs 1,38,073 crore, up from Rs 99,488 crore in the same period during the previous fiscal, personal income tax (including FBT, STT and BCTT) grew by 45.64 per cent at Rs 90,356 crore, up from Rs 62,040 crore.
An official statement said that securities transaction tax (STT) collections recorded 84.64 per cent growth to Rs 7,878 crore (Rs 4,267 crore). Fringe benefit tax (FBT) collections were up 29.75 per cent to Rs 5,216 crore (Rs 4,020 crore). Banking cash transaction tax (BCTT) collections grew 16.81 per cent to Rs 478 crore (Rs 409 crore)
The strong growth in direct tax collections so far in the current fiscal has raised hope among taxpayers that the Finance Minister, Mr P Chidambaram, would moderate direct tax rates in the forthcoming budget.
While corporate tax collections grew 38.78 per cent for the period under review at Rs 1,38,073 crore, up from Rs 99,488 crore in the same period during the previous fiscal, personal income tax (including FBT, STT and BCTT) grew by 45.64 per cent at Rs 90,356 crore, up from Rs 62,040 crore.
An official statement said that securities transaction tax (STT) collections recorded 84.64 per cent growth to Rs 7,878 crore (Rs 4,267 crore). Fringe benefit tax (FBT) collections were up 29.75 per cent to Rs 5,216 crore (Rs 4,020 crore). Banking cash transaction tax (BCTT) collections grew 16.81 per cent to Rs 478 crore (Rs 409 crore)
Asian market up on 21 feb 2008
Stocks rallied on Thursday as solid earnings and expectations of further US interest rate cuts outweighed worries about inflation even as oil hit a record high above $101 a barrel. Gold also hit a record above $945 an ounce, and silver touched a 27-year high, as funds poured into a wide range of commodities, betting they will outperform in an environment where growth is slowing and prices are rising.
Data on Wednesday showed a faster-than-expected rise in US consumer prices last month and further weakness in the housing market there.
"The US is entirely focused on the economic data that is coming out and we're getting revised forecasts for their economic growth in the downward trend," said Savanth Sebastian, equities economist at CommSec in Sydney. "(The Federal Reserve) will have to cut rates and the possibility of that is boosting sentiment."
The weak housing market and problems in the credit market prompted the Fed to lower its 2008 US economic growth forecasts on Wednesday, with analysts interpreting comments as paving the way for further reductions in borrowing costs. Japan's benchmark Nikkei rose 2.1 per cent, trimming most of Wednesday's losses, while MSCI's index of other Asian stocks gained 1.2 per cent by 0247 GMT.
Since tumbling more than 10 per cent in January, Asia stocks have endured choppy, volatile trade and investors are wary of calling an end to that. "It's like a Japanese saying about a winter season around this time; three cold days and four warm days," said Katsuhiko Kodama, senior strategist at Toyo Securities.
Taiwan stocks rose 1.6 per cent, in line with Hong Kong, but Shanghai fell more than 2 per cent on concerns about further new share issues flooding the market. Australian stocks added 1 per cent, helped by solid earnings from phone company Telstra, pallet maker Brambles and national carrier Qantas.
Data on Wednesday showed a faster-than-expected rise in US consumer prices last month and further weakness in the housing market there.
"The US is entirely focused on the economic data that is coming out and we're getting revised forecasts for their economic growth in the downward trend," said Savanth Sebastian, equities economist at CommSec in Sydney. "(The Federal Reserve) will have to cut rates and the possibility of that is boosting sentiment."
The weak housing market and problems in the credit market prompted the Fed to lower its 2008 US economic growth forecasts on Wednesday, with analysts interpreting comments as paving the way for further reductions in borrowing costs. Japan's benchmark Nikkei rose 2.1 per cent, trimming most of Wednesday's losses, while MSCI's index of other Asian stocks gained 1.2 per cent by 0247 GMT.
Since tumbling more than 10 per cent in January, Asia stocks have endured choppy, volatile trade and investors are wary of calling an end to that. "It's like a Japanese saying about a winter season around this time; three cold days and four warm days," said Katsuhiko Kodama, senior strategist at Toyo Securities.
Taiwan stocks rose 1.6 per cent, in line with Hong Kong, but Shanghai fell more than 2 per cent on concerns about further new share issues flooding the market. Australian stocks added 1 per cent, helped by solid earnings from phone company Telstra, pallet maker Brambles and national carrier Qantas.
ADAG wins 6000 cr order
Anil Amabni group company Reliance Energy today outbid elder brother Mukesh's consortium to win the prestigious Rs 6,000-crore trans-harbour link project in Mumbai.
Only Reliance Energy and a consortium led by Mukesh Ambani were in the fray for the prestigious project.
Anil's bid was first rejected by the state government on technical grounds at the pre-qualification stage but the government had to issue the bid document to him after a directive from the Supreme Court.
The 22-km long bridge that will connect Sewri in Mumbai with Nhava-Sheva across the harbour will be the second longest seaway in the world, next to the one in China which is about 36 km long.
Earlier, Reliance Energy had won the the Rs 3,800 crore metro link project for connecting the New Delhi Railway Station and the Indira Gandhi International airport. In the previous year, the company had Maharashtra's Minister for Public Works Anil Deshmukh told reporters that the work on the five-year project is expected to start by December this year.
Only Reliance Energy and a consortium led by Mukesh Ambani were in the fray for the prestigious project.
Anil's bid was first rejected by the state government on technical grounds at the pre-qualification stage but the government had to issue the bid document to him after a directive from the Supreme Court.
The 22-km long bridge that will connect Sewri in Mumbai with Nhava-Sheva across the harbour will be the second longest seaway in the world, next to the one in China which is about 36 km long.
Earlier, Reliance Energy had won the the Rs 3,800 crore metro link project for connecting the New Delhi Railway Station and the Indira Gandhi International airport. In the previous year, the company had Maharashtra's Minister for Public Works Anil Deshmukh told reporters that the work on the five-year project is expected to start by December this year.
Rcom in global market
Reliance Communications Ltd on February 21, 2008 has announced the acquisition of Uganda based Anupam Global Soft (U) Ltd a Company holding Public Infrastructure Provider License (PIPL) and Public Service Provider License (PSPL) issued by Uganda Communications Commission. The acquisition, made through a subsidiary of Reliance Communications Ltd, marks the first step in the Company's plans in the International Mobile market.
Under the existing Licenses, Reliance Communications targets to offer Mobile, Fixed Line, Internet, National and International Long Distance services, in addition to WiMax and Wifi services in Uganda.
This Company has received Spectrum allocation and plans to launch its Mobile services by end of 2008. Reliance Communications Group is targeting to invest upto US$ 500 million (Rs 2000 crore) in establishing a high quality, fully-IP enabled integrated telecom network in Uganda to capture the significant growth potential in this emerging African market.
Punit Garg, President, Global Business, Reliance Communications said, "Uganda telecom market is similar to what India was 8 years back. Our expertise in managing among worlds largest integrated telecom network, and deep understanding of diverse consumer segments makes us confident to achieve a significant position to add further value for our 2 million shareholders."
The Company plans to connect the African continent with rest of the world by laying a submarine cable system through its arm Reliance FLAG plans to spend USD1.5 Billion (Rs 6000 crore) in building a 1,15,000 Kms fully-IP enabled optic network to reach 2/3rd of World population.
Reliance Communications has ambitious global expansion plans and is concentrating on opportunities in emerging Asian and African markets. The Company has established a pan-India, next generation, integrated (wireless and wireline), convergent digital network that is capable of supporting best-of-class services spanning the entire Infocomm value chain.
Uganda has a population of approx. 30 million with a significant literacy rate of approx. 62%. There were 3.016 million mobile subscribers by end-March 2007 (source: UCC), equivalent to a penetration rate of 10%, providing ample scope of expansion. The existing telecom players have been witnessing healthy subscriber and ARPU growth recently.
Under the existing Licenses, Reliance Communications targets to offer Mobile, Fixed Line, Internet, National and International Long Distance services, in addition to WiMax and Wifi services in Uganda.
This Company has received Spectrum allocation and plans to launch its Mobile services by end of 2008. Reliance Communications Group is targeting to invest upto US$ 500 million (Rs 2000 crore) in establishing a high quality, fully-IP enabled integrated telecom network in Uganda to capture the significant growth potential in this emerging African market.
Punit Garg, President, Global Business, Reliance Communications said, "Uganda telecom market is similar to what India was 8 years back. Our expertise in managing among worlds largest integrated telecom network, and deep understanding of diverse consumer segments makes us confident to achieve a significant position to add further value for our 2 million shareholders."
The Company plans to connect the African continent with rest of the world by laying a submarine cable system through its arm Reliance FLAG plans to spend USD1.5 Billion (Rs 6000 crore) in building a 1,15,000 Kms fully-IP enabled optic network to reach 2/3rd of World population.
Reliance Communications has ambitious global expansion plans and is concentrating on opportunities in emerging Asian and African markets. The Company has established a pan-India, next generation, integrated (wireless and wireline), convergent digital network that is capable of supporting best-of-class services spanning the entire Infocomm value chain.
Uganda has a population of approx. 30 million with a significant literacy rate of approx. 62%. There were 3.016 million mobile subscribers by end-March 2007 (source: UCC), equivalent to a penetration rate of 10%, providing ample scope of expansion. The existing telecom players have been witnessing healthy subscriber and ARPU growth recently.
Rate cut
State Bank of India, the country's biggest lender, said on Wednesday it had cut its prime lending by 25 basis points to 12.25 percent from February 27, lowering the rate for the second time this month.
Last week, the government-run bank had said it had reduced the rate by a quarter point to 12.50 percent from February 16.
Last week, the government-run bank had said it had reduced the rate by a quarter point to 12.50 percent from February 16.
parsvanath
Parsvnath Developers Ltd on February 21, 2008 has announced the beginning of construction of its prestigious Mall at Rohini christened as "Parsvnath Mall". Parsvnath will invest approx. Rs 280 crores in the project. The Company performed the earth-breaking ceremony today.
Spread over Lower Ground, Ground and five floors, Parsvnath mall is located at a strategic location of North West Delhi at Twin District Centre of Rohini. Parsvnath mall is spread over a total area of approximately 7,300 sq. meters offering a saleable area of approx. 2.63 lac sq. ft. Parsvnath had won the bid for land in an auction by Delhi Development Authority (DDA) last year.
The Parsvnath Mall along with basic amenities will also offer the facility of an exclusive club with provisions for fitness centre, spas, swimming pool besides making the mall an ideal place for shopping, entertainment with elaborate food courts.
The mall will be equipped with banquet and will be an ideal place for holding seminars, workshops and conferences. It will also host festivals, carnivals and will be a finest avenue for exhibitions, launch events and cultural events.
Apart from Parsvnath Mall, Parsvnath Developers is also developing malls on six DMRC stations on BoT basis in the city and has successfully handed over 7 DMRC Projects.
Spread over Lower Ground, Ground and five floors, Parsvnath mall is located at a strategic location of North West Delhi at Twin District Centre of Rohini. Parsvnath mall is spread over a total area of approximately 7,300 sq. meters offering a saleable area of approx. 2.63 lac sq. ft. Parsvnath had won the bid for land in an auction by Delhi Development Authority (DDA) last year.
The Parsvnath Mall along with basic amenities will also offer the facility of an exclusive club with provisions for fitness centre, spas, swimming pool besides making the mall an ideal place for shopping, entertainment with elaborate food courts.
The mall will be equipped with banquet and will be an ideal place for holding seminars, workshops and conferences. It will also host festivals, carnivals and will be a finest avenue for exhibitions, launch events and cultural events.
Apart from Parsvnath Mall, Parsvnath Developers is also developing malls on six DMRC stations on BoT basis in the city and has successfully handed over 7 DMRC Projects.
Japan grows
Japan's export growth unexpectedly quickened in January, as rising demand for cars and steel from China and Russia made up for falling U.S. sales.
Exports, the engine that drove almost half of the economy's expansion last quarter, rose 7.7 percent, from December's 6.9 percent gain, the Finance Ministry said today in Tokyo. The median estimate of 18 economists surveyed by Bloomberg was for a 6.6 percent increase.
Shipments to Asia and Europe rose to records for the month, as growing consumer classes in China, India and Russia create new customers for exporters including Mitsubishi Motors Corp. and Matsushita Electric Industrial Co. Exports to the U.S. fell for a fifth month amid the worst housing slump in 26 years.
``The good news is the destinations for Japan's export products have become far more diversified,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. The bad news is that ``a protracted U.S. recession would be much harder to shelter from.''
The yen was little changed, trading at 108.10 per dollar at 12:13 p.m. in Tokyo from 107.99 before the report was published.
The International Monetary Fund last month forecast emerging economies will expand 6.9 percent in 2008, compared with 1.5 percent growth in the U.S. China will expand 10 percent.
Waning demand in the U.S., the world's biggest economy, will eventually take its toll on the emerging markets where Japan ships about half its goods, Economic and Fiscal Policy Minister Hiroko Ota said last week.
Exports, the engine that drove almost half of the economy's expansion last quarter, rose 7.7 percent, from December's 6.9 percent gain, the Finance Ministry said today in Tokyo. The median estimate of 18 economists surveyed by Bloomberg was for a 6.6 percent increase.
Shipments to Asia and Europe rose to records for the month, as growing consumer classes in China, India and Russia create new customers for exporters including Mitsubishi Motors Corp. and Matsushita Electric Industrial Co. Exports to the U.S. fell for a fifth month amid the worst housing slump in 26 years.
``The good news is the destinations for Japan's export products have become far more diversified,'' said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. The bad news is that ``a protracted U.S. recession would be much harder to shelter from.''
The yen was little changed, trading at 108.10 per dollar at 12:13 p.m. in Tokyo from 107.99 before the report was published.
The International Monetary Fund last month forecast emerging economies will expand 6.9 percent in 2008, compared with 1.5 percent growth in the U.S. China will expand 10 percent.
Waning demand in the U.S., the world's biggest economy, will eventually take its toll on the emerging markets where Japan ships about half its goods, Economic and Fiscal Policy Minister Hiroko Ota said last week.
Intra day trading stocks for 21st Feb, 2008
GMR Infrastructure, Buy around Rs 173, Target1 -Rs180, Target 2 - Rs. 185, Stop Loss- Rs 170
Gujrat NRE Coke, Buy around Rs 157, Target 1- Rs. 164, Target 2- Rs 167, Stop Loss- Rs 152
Gujrat NRE Coke, Buy around Rs 157, Target 1- Rs. 164, Target 2- Rs 167, Stop Loss- Rs 152
Wednesday, February 20, 2008
Reliance Communications drops after large acquisition buzz
Meanwhile the BSE Sensex was down 152.84 points or 0.85% on weak cues from
the global markets. US stocks dropped on Thursday, 14 February 2008, as the
credit crunch surfaced unexpectedly in the municipal bond market and after
the Federal Reserve Chairman Ben Bernanke said that he sees sluggish
economic growth ahead.
On BSE, 1.25 lakh shares of the scrip were traded. The stock had an average
daily volume of 17.57 lakh shares on BSE in past one quarter.
The scrip had touched a high of Rs 605 and a low of Rs 595 so far during the
day. The stock had hit a 52-week high of Rs 844 on 10 January 2008 and a
52-week low of Rs 371.25 on 16 March 2007.
The large-cap scrip had underperformed the market over the past one month
till 14 February 2008, declining 16.66% compared to the Sensex's decline of
10.58%. It also underperformed the market in the past one quarter, declining
13.85% compared to Sensex's fall of 9.81%.
India's second largest listed telecom firm by sales has an equity capital of
Rs 1032 crore. Face value per share is Rs 5.
At the current price of Rs 599.50, the scrip trades at a PE multiple of
70.86, based on Q3 December 2007 annualised EPS of Rs 8.46.
As per reports, Reliance Communications is interested in building a
significant IT business and acquisition of Capgemini would give it access to
a client base in continental Europe and catapult it among the world's top
ten IT groups by market share. The media reports said that both Reliance
Communications and Capgemini declined to comment.
Reliance Communications' net profit fell 43.4% to Rs 436.48 crore on
11.8%rise in sales to Rs
3403.52 crore in Q3 December 2007 over Q3 December 2006.
Reliance Communication provides telecommunication services. The company
provides wireless, wire line, voice, data and Internet communication
services.
Source: Capital Market
the global markets. US stocks dropped on Thursday, 14 February 2008, as the
credit crunch surfaced unexpectedly in the municipal bond market and after
the Federal Reserve Chairman Ben Bernanke said that he sees sluggish
economic growth ahead.
On BSE, 1.25 lakh shares of the scrip were traded. The stock had an average
daily volume of 17.57 lakh shares on BSE in past one quarter.
The scrip had touched a high of Rs 605 and a low of Rs 595 so far during the
day. The stock had hit a 52-week high of Rs 844 on 10 January 2008 and a
52-week low of Rs 371.25 on 16 March 2007.
The large-cap scrip had underperformed the market over the past one month
till 14 February 2008, declining 16.66% compared to the Sensex's decline of
10.58%. It also underperformed the market in the past one quarter, declining
13.85% compared to Sensex's fall of 9.81%.
India's second largest listed telecom firm by sales has an equity capital of
Rs 1032 crore. Face value per share is Rs 5.
At the current price of Rs 599.50, the scrip trades at a PE multiple of
70.86, based on Q3 December 2007 annualised EPS of Rs 8.46.
As per reports, Reliance Communications is interested in building a
significant IT business and acquisition of Capgemini would give it access to
a client base in continental Europe and catapult it among the world's top
ten IT groups by market share. The media reports said that both Reliance
Communications and Capgemini declined to comment.
Reliance Communications' net profit fell 43.4% to Rs 436.48 crore on
11.8%rise in sales to Rs
3403.52 crore in Q3 December 2007 over Q3 December 2006.
Reliance Communication provides telecommunication services. The company
provides wireless, wire line, voice, data and Internet communication
services.
Source: Capital Market
REC Report
It's a difficult time to be recommending a SUBSCRIBE on any IPO, but REC (Rural Electrification Corporation) seems to be a deserving exception. Here's an IPO note on the company.
Mandated by the government of India to lend to the power sector, REC's focus so far has been on the T&D space as opposed to its larger cousin PFC's generation focus. Growing its loan book is definitely not a worry for this company, as the power sector is a key thrust area for the 11th and 12th five year plans. I would expect a minimum of 25% loan book growth, and high asset quality.
And this in spite of the fact that it lends almost entirely to PSUs. Why ? Simple, after years of loss making operations, most SEBs are aggressively reforming with generation, transmission and distribution operations sliced out into different entities. Financial and operational reform are the two pillars on which may sick SEBs are being revived. Add growth to this situation, and you have a sweet spot for lenders. Let's face it : there's nothing more attractive for lenders than ten straight years of growth and almost no worry on asset quality.
My worry is on sustainability of spreads. The company's NIMs (net interest margins) are very healthy, at over 3%. The offered reason is the long tenure lending that it does, aided in ample measure by the tax free bonds that it can issue to depositors. Some of this charm will get eroded now that government has mandated a ceiling of Rs 50 lacs for any entitiy investing in these bonds. The company claims that interest margins will still not erode significantly, since fee incomes will begin soon and it will borrow from banks at competitive rates. This is possible, because banks' provisioning is stricter for direct lending to projects as compared to the lenient provisioning norms when they lend to REC, PFC, etc. Let's see how this pans out for REC's interest margins...
Meanwhile, REC's basic return to shareholders (RoE) is consistently high at well above 20%. This is likely to level off to a shade under 20%, but remember there's headroom (debt : equity likely to fall to under 7 from over 8.9 in FY07, after the recent fund raising) to borrow more and push up RoE. After the encouraging half yearly showing and the IPO, REC's adjusted book value per share will rise to over Rs 58, so you are buying this stock for less than 2X ABV on an immediate basis. Even if H2 is the same as H1, REC should add at least six rupees per share to this ABV. And if in FY09 the company merely replicates its FY08 showing, it will have an ABV of over Rs 76.
All in all, a good company with a bright future, going public in relatively troubled times. If you can detach yourself from the near term market worries, you will see REC's business shining through and feel like applying. That's exactly what I intend doing !
Mandated by the government of India to lend to the power sector, REC's focus so far has been on the T&D space as opposed to its larger cousin PFC's generation focus. Growing its loan book is definitely not a worry for this company, as the power sector is a key thrust area for the 11th and 12th five year plans. I would expect a minimum of 25% loan book growth, and high asset quality.
And this in spite of the fact that it lends almost entirely to PSUs. Why ? Simple, after years of loss making operations, most SEBs are aggressively reforming with generation, transmission and distribution operations sliced out into different entities. Financial and operational reform are the two pillars on which may sick SEBs are being revived. Add growth to this situation, and you have a sweet spot for lenders. Let's face it : there's nothing more attractive for lenders than ten straight years of growth and almost no worry on asset quality.
My worry is on sustainability of spreads. The company's NIMs (net interest margins) are very healthy, at over 3%. The offered reason is the long tenure lending that it does, aided in ample measure by the tax free bonds that it can issue to depositors. Some of this charm will get eroded now that government has mandated a ceiling of Rs 50 lacs for any entitiy investing in these bonds. The company claims that interest margins will still not erode significantly, since fee incomes will begin soon and it will borrow from banks at competitive rates. This is possible, because banks' provisioning is stricter for direct lending to projects as compared to the lenient provisioning norms when they lend to REC, PFC, etc. Let's see how this pans out for REC's interest margins...
Meanwhile, REC's basic return to shareholders (RoE) is consistently high at well above 20%. This is likely to level off to a shade under 20%, but remember there's headroom (debt : equity likely to fall to under 7 from over 8.9 in FY07, after the recent fund raising) to borrow more and push up RoE. After the encouraging half yearly showing and the IPO, REC's adjusted book value per share will rise to over Rs 58, so you are buying this stock for less than 2X ABV on an immediate basis. Even if H2 is the same as H1, REC should add at least six rupees per share to this ABV. And if in FY09 the company merely replicates its FY08 showing, it will have an ABV of over Rs 76.
All in all, a good company with a bright future, going public in relatively troubled times. If you can detach yourself from the near term market worries, you will see REC's business shining through and feel like applying. That's exactly what I intend doing !
Kohinoor Broadcasting
*KOHINOOR BROADCASTING CORPORATION LIMITED*
*BSE Code: 531336*
*Book Value: Rs.15.95*
*Market Cap: Rs.104.14 Cr*
*Face Value: Rs.10*
*Market Performance: Out-performer*
*Target: Rs.70--Rs.80 in 12 -18 months time frame*
**
*Introduction: Kohinoor Broadcasting Corporation Ltd was incorporated by a
group of professionals with Mr. Harjinder Singh and Mr. Mangal Singh as key
promoters of the Company since its incorporation on 11 October 1994. During
2003 the Board decided to establish facilities for production of
advertisements, TV programmes music programmes and certain other
entertainment related activities. The Company is currently engaged in the
media and entertainment industry with a particular focus on the TV sector or
Visual Media *
*The Company has diversified in the production of TV programmes including
current affairs, music, serialised drama and other entertainment
programmes.The Company has got approval from Ministry of Broadcasting for
setting up earth station for up-linking the television channels. The Company
is setting up earth station and news studios at Rajpura and remote studios
in India at Delhi, Mumbai, Calcutta, Chennai and Jammu and outside India at
Dubai and London. In this regard, the designs have been finalised and the
equipment has been brought. The consultants have been appointed and they are
sourcing the space at the locations.*
*The Company shall also set up fifteen mobile studios for better coverage of
the events, which would be moving from one part to another. It is proposed
that each region shall have three mobile studios to cover on the spot. *
*Besides, the Company would have six mini vans cum mobile studio to cover
offices of the Chief Ministers of Punjab, Haryana, Himachal, Jammu & Kashmir
and Delhi in the first stage. The equipments have been identified. The
orders shall be placed in due course. The supply period is three months. *
*Shareholding Pattern: The promoter holding is at present very less and is
more or less managed by the Board of Directors like may other established
companies, who are doing well. But due to the high prospects of the company
going forward, the promoters are proposing to increase their stake through
private placements. The company has already informed about its desire to
offer, issue and allot up to 100,000,000 Equity Shares of Rs 10/- each on
private placement basis in one or more trenches to person resident outside
India, by way of Global Depository Receipts/American Depository Receipts or
Foreign Currency Convertible Bonds on such terms and conditions as may be
fixed by the Directors of the Company, subject to necessary provisions &
approvals. This is a very positive news on the company, since if a company
did not have fundamentals then it shoud not have gone for GDRs.*
*Financials: The company came out with excellent consolidated results (the
results including its overseas subsidiaries in Dubai and UK) for the
December, 2007 quarter
Though the total income of the Company in Q3FY08, remained flat to
Rs.52.05lakhs against
Rs.59.62 Cr in the same period previous year, but PBDT (Profit before tax
and depreciation) jumped to Rs.6.02 Cr as against Rs.1.09 Cr in the same
period previous year. For the nine months ended 31st December, 2008, the
PBDT came out to be Rs.12.40 Cr as against Rs.3.04 Cr in the same period
previous year. *
*For the Q3FY08, the Net Profits of the company zoomed to Rs.5.46 Cr against
Rs.76 lakhs in the same period previous year. The EPS for the Q3FY08 is
Rs.6.21 against Rs.2.33 in Q3FY07. This is remarkable considering that the
company had an EPS of only Rs.2.22 in FY07. *
*Triggers:*
*1. The company has received the equipment for Teleport to be set up at
Rajpura involving a capital outlay of Rs.5 Cr.*
*2. The company has placed the orders for play-out station to be set up at
Rajpura involving a capital outlay of Rs.10 Cr.*
*3. The company is in the process of making large scale recruitments of
manpower approx. 60 people for the production of content for its
entertainment channel. *
*4. The company has started producing buffer content for its forthcoming
News and Entertainment Channels.*
*5. The Company is coming up with 4 (four) New Channels which are as
follows:*
*a) KBC News--The popular Hindi New Channel*
*b)KBC Plus---The popular Entertainment Channel*
*c)KBC Gold--The popular Hindi/English/Regional Movie Channel and*
*v) KBC Profit--The popular Business Channel like NDTV Profit. *
*6.The company in principle has taken over M/S Tagore Theatres Ltd, a
multiplex valued at Rs.100 Cr. The company has appointed reputed agencies to
decide the Swap ratio for the proposed take over. *
*7. The company is opening new subsidiaries in Japan, Singapore and the USA.
The top company's officials were in the USA last month to finalise a deal
there. *
*8. The Company is likely to benefit from the DTH and CAS, which is bringing
a revolution in the media sector as a whole. *
*9. The promoters of the company are expected to increase their stake in the
company through a private placement, if the sources are to be believed. The
company has already announced that it will be conducting an EGM on 4 th
March, 2008, to offer, issue and allot up to 100,000,000 Equity Shares of Rs
10/- each on private placement basis in one or more trenches to person
resident outside India, by way of Global Depository Receipts/American
Depository Receipts or Foreign Currency Convertible Bonds on such terms and
conditions as may be fixed by the Directors of the Company, subject to
necessary provisions & approvals.*
*10. The Company proposes to invest an aggregate sum not exceeding Rs 200
Crores, in the equity shares of the Wholly Owned Subsidiaries (WOS) of the
Company viz. Kohinoor Broadcasting Corporation FZE and other subsidiaries to
be incorporated world wide notwithstanding that Such investment together
with the investment in all other bodies corporate may exceed 60% of the paid
up capital and free reserves or 100% of its free reserves whichever is more,
subject to necessary provisions & approvals. HENCE THE MEETING OF 4TH MARCH,
2008 IS VERY IMPORTANT. *
*Conclusion: Considering all the points mentioned above including the last
quarter EPS of Rs.6.21, it has been found that the scrip of Kohinoor
Broadcasting Corporation Ltd is highly undervalued and could purchased at
the CMP of Rs.8.98 for a target of Rs.70-Rs.80 in 12 to 18 months time
frame. But if the company is able to lauch its new Channels a little early
than the proposed dates and is able to open its overseas subsidiaries within
a short time, then the scrip could cross Rs.100--Rs.120 in the stipulated
time. This is a hidden gem in the media sector and a turnaround case like
Ispat Industries Ltd*
*BSE Code: 531336*
*Book Value: Rs.15.95*
*Market Cap: Rs.104.14 Cr*
*Face Value: Rs.10*
*Market Performance: Out-performer*
*Target: Rs.70--Rs.80 in 12 -18 months time frame*
**
*Introduction: Kohinoor Broadcasting Corporation Ltd was incorporated by a
group of professionals with Mr. Harjinder Singh and Mr. Mangal Singh as key
promoters of the Company since its incorporation on 11 October 1994. During
2003 the Board decided to establish facilities for production of
advertisements, TV programmes music programmes and certain other
entertainment related activities. The Company is currently engaged in the
media and entertainment industry with a particular focus on the TV sector or
Visual Media *
*The Company has diversified in the production of TV programmes including
current affairs, music, serialised drama and other entertainment
programmes.The Company has got approval from Ministry of Broadcasting for
setting up earth station for up-linking the television channels. The Company
is setting up earth station and news studios at Rajpura and remote studios
in India at Delhi, Mumbai, Calcutta, Chennai and Jammu and outside India at
Dubai and London. In this regard, the designs have been finalised and the
equipment has been brought. The consultants have been appointed and they are
sourcing the space at the locations.*
*The Company shall also set up fifteen mobile studios for better coverage of
the events, which would be moving from one part to another. It is proposed
that each region shall have three mobile studios to cover on the spot. *
*Besides, the Company would have six mini vans cum mobile studio to cover
offices of the Chief Ministers of Punjab, Haryana, Himachal, Jammu & Kashmir
and Delhi in the first stage. The equipments have been identified. The
orders shall be placed in due course. The supply period is three months. *
*Shareholding Pattern: The promoter holding is at present very less and is
more or less managed by the Board of Directors like may other established
companies, who are doing well. But due to the high prospects of the company
going forward, the promoters are proposing to increase their stake through
private placements. The company has already informed about its desire to
offer, issue and allot up to 100,000,000 Equity Shares of Rs 10/- each on
private placement basis in one or more trenches to person resident outside
India, by way of Global Depository Receipts/American Depository Receipts or
Foreign Currency Convertible Bonds on such terms and conditions as may be
fixed by the Directors of the Company, subject to necessary provisions &
approvals. This is a very positive news on the company, since if a company
did not have fundamentals then it shoud not have gone for GDRs.*
*Financials: The company came out with excellent consolidated results (the
results including its overseas subsidiaries in Dubai and UK) for the
December, 2007 quarter
Though the total income of the Company in Q3FY08, remained flat to
Rs.52.05lakhs against
Rs.59.62 Cr in the same period previous year, but PBDT (Profit before tax
and depreciation) jumped to Rs.6.02 Cr as against Rs.1.09 Cr in the same
period previous year. For the nine months ended 31st December, 2008, the
PBDT came out to be Rs.12.40 Cr as against Rs.3.04 Cr in the same period
previous year. *
*For the Q3FY08, the Net Profits of the company zoomed to Rs.5.46 Cr against
Rs.76 lakhs in the same period previous year. The EPS for the Q3FY08 is
Rs.6.21 against Rs.2.33 in Q3FY07. This is remarkable considering that the
company had an EPS of only Rs.2.22 in FY07. *
*Triggers:*
*1. The company has received the equipment for Teleport to be set up at
Rajpura involving a capital outlay of Rs.5 Cr.*
*2. The company has placed the orders for play-out station to be set up at
Rajpura involving a capital outlay of Rs.10 Cr.*
*3. The company is in the process of making large scale recruitments of
manpower approx. 60 people for the production of content for its
entertainment channel. *
*4. The company has started producing buffer content for its forthcoming
News and Entertainment Channels.*
*5. The Company is coming up with 4 (four) New Channels which are as
follows:*
*a) KBC News--The popular Hindi New Channel*
*b)KBC Plus---The popular Entertainment Channel*
*c)KBC Gold--The popular Hindi/English/Regional Movie Channel and*
*v) KBC Profit--The popular Business Channel like NDTV Profit. *
*6.The company in principle has taken over M/S Tagore Theatres Ltd, a
multiplex valued at Rs.100 Cr. The company has appointed reputed agencies to
decide the Swap ratio for the proposed take over. *
*7. The company is opening new subsidiaries in Japan, Singapore and the USA.
The top company's officials were in the USA last month to finalise a deal
there. *
*8. The Company is likely to benefit from the DTH and CAS, which is bringing
a revolution in the media sector as a whole. *
*9. The promoters of the company are expected to increase their stake in the
company through a private placement, if the sources are to be believed. The
company has already announced that it will be conducting an EGM on 4 th
March, 2008, to offer, issue and allot up to 100,000,000 Equity Shares of Rs
10/- each on private placement basis in one or more trenches to person
resident outside India, by way of Global Depository Receipts/American
Depository Receipts or Foreign Currency Convertible Bonds on such terms and
conditions as may be fixed by the Directors of the Company, subject to
necessary provisions & approvals.*
*10. The Company proposes to invest an aggregate sum not exceeding Rs 200
Crores, in the equity shares of the Wholly Owned Subsidiaries (WOS) of the
Company viz. Kohinoor Broadcasting Corporation FZE and other subsidiaries to
be incorporated world wide notwithstanding that Such investment together
with the investment in all other bodies corporate may exceed 60% of the paid
up capital and free reserves or 100% of its free reserves whichever is more,
subject to necessary provisions & approvals. HENCE THE MEETING OF 4TH MARCH,
2008 IS VERY IMPORTANT. *
*Conclusion: Considering all the points mentioned above including the last
quarter EPS of Rs.6.21, it has been found that the scrip of Kohinoor
Broadcasting Corporation Ltd is highly undervalued and could purchased at
the CMP of Rs.8.98 for a target of Rs.70-Rs.80 in 12 to 18 months time
frame. But if the company is able to lauch its new Channels a little early
than the proposed dates and is able to open its overseas subsidiaries within
a short time, then the scrip could cross Rs.100--Rs.120 in the stipulated
time. This is a hidden gem in the media sector and a turnaround case like
Ispat Industries Ltd*
World Economy and Indian Markets
The price of gold will soon make a new high(Although I will sell if I see $938 in next couple of days on intraday basis) People around the globe are running towards precious metals. Platinium makes a new record daily. Silver is outperforming gold. This all could be the economic indicators that we are overlooking. The overall economic scenario around the world looks fragile.Is it too late too talk about this now? What will happen next? what about the India growth story?
The Indian growth story is very much intact I would say but, the world growth tale(fable) doesn't looks so great. So we thought that the subprime crisis gave us the bad times. Hello! this could just be the start. The losses till date reported have come from the sell side firms only which could be around say $400 billion ++. But what about those players who are on the buy side. what about those who have bought these structured products (credit derivatives). They are yet to show up. Even in India it was reported that few banks would have been carrying these items in there portfolio(reported by NDTV profit). Is it over? Not yet. As the grapevine goes we are into the corrective wave of the five way Indian bull market(Elliott wave theory) and not to mention the gap the charts showing gap at around 14500 on the sensex(Indian Index).
What I want to bring to the notice is that there will be some trigger which could take the world markets for the surprise (Dont forget commodity market is also rallying esp. Precious and base metals). So this all need to correct. This happened in 2006 may when all the markets corrected. This time the trigger could be anything inflation, more losses could come out, could be budjet or it could even be Kosovo-Serbia clash.
Some how all this is not fitting right. People should invest keeping all this in mind and be catious. Technically everything needs a correction. We just need to identify are we with the trend or with the correction of that trend.
Any views are most Welcomed
The Indian growth story is very much intact I would say but, the world growth tale(fable) doesn't looks so great. So we thought that the subprime crisis gave us the bad times. Hello! this could just be the start. The losses till date reported have come from the sell side firms only which could be around say $400 billion ++. But what about those players who are on the buy side. what about those who have bought these structured products (credit derivatives). They are yet to show up. Even in India it was reported that few banks would have been carrying these items in there portfolio(reported by NDTV profit). Is it over? Not yet. As the grapevine goes we are into the corrective wave of the five way Indian bull market(Elliott wave theory) and not to mention the gap the charts showing gap at around 14500 on the sensex(Indian Index).
What I want to bring to the notice is that there will be some trigger which could take the world markets for the surprise (Dont forget commodity market is also rallying esp. Precious and base metals). So this all need to correct. This happened in 2006 may when all the markets corrected. This time the trigger could be anything inflation, more losses could come out, could be budjet or it could even be Kosovo-Serbia clash.
Some how all this is not fitting right. People should invest keeping all this in mind and be catious. Technically everything needs a correction. We just need to identify are we with the trend or with the correction of that trend.
Any views are most Welcomed
Pension fund savings may get tax-free
Pradeep Thakur & Sidhartha | TNN
New Delhi: Soon, there could be another reason for you to save for old age. The government may completely exempt investments in pension funds from taxes.
While money parked in pension funds at present entitles investors to a tax rebate at the time of investment and during the period it earns returns, a tax is levied at the time of withdrawal.
As a sweetener aimed at encouraging people to invest and also blunt the Left's opposition to the new pension system, the Pension Fund Regulatory & Development Authority has approached the finance ministry to treat investments in these instruments at par with employees provident fund and public provident fund, which enjoy complete tax waiver.
Sources said that the pension regulator has also pushed for raising the overall investment limit under section 80C of the Income Tax Act beyond the present level of Rs 1.1 lakh.
At present, PFRDA's interest stems from the Rs 3,000 crore that is sitting with the government and could flow into the stock and the debt markets over the next six to eight weeks. The money has been contributed by government employees as part of the contributory system that kicked in for those who joined service from January 1, 2004.
Sources said that with the sixth pay commission's report also expected to be implemented later this year, the government seemed favourably inclined to accept the proposal as it would push up the overall savings rate too. As part of the push to create more jobs, both Prime Minister Manmohan Singh and finance minister P Chidambaram have repeatedly pushed for higher savings rate, estimated at 34.8% at the end of 2006-07, to raise the level of investment in the economy.
In addition, companies have argued that in the absence of a social security system for people working in the private sector, whose numbers are rising rapidly, there is enough reason to encourage people to save in long-term instruments like pension products which can also be deployed in bonds that mature after 25-30 years. These bonds could be used to finance infrastructure projects.
New Delhi: Soon, there could be another reason for you to save for old age. The government may completely exempt investments in pension funds from taxes.
While money parked in pension funds at present entitles investors to a tax rebate at the time of investment and during the period it earns returns, a tax is levied at the time of withdrawal.
As a sweetener aimed at encouraging people to invest and also blunt the Left's opposition to the new pension system, the Pension Fund Regulatory & Development Authority has approached the finance ministry to treat investments in these instruments at par with employees provident fund and public provident fund, which enjoy complete tax waiver.
Sources said that the pension regulator has also pushed for raising the overall investment limit under section 80C of the Income Tax Act beyond the present level of Rs 1.1 lakh.
At present, PFRDA's interest stems from the Rs 3,000 crore that is sitting with the government and could flow into the stock and the debt markets over the next six to eight weeks. The money has been contributed by government employees as part of the contributory system that kicked in for those who joined service from January 1, 2004.
Sources said that with the sixth pay commission's report also expected to be implemented later this year, the government seemed favourably inclined to accept the proposal as it would push up the overall savings rate too. As part of the push to create more jobs, both Prime Minister Manmohan Singh and finance minister P Chidambaram have repeatedly pushed for higher savings rate, estimated at 34.8% at the end of 2006-07, to raise the level of investment in the economy.
In addition, companies have argued that in the absence of a social security system for people working in the private sector, whose numbers are rising rapidly, there is enough reason to encourage people to save in long-term instruments like pension products which can also be deployed in bonds that mature after 25-30 years. These bonds could be used to finance infrastructure projects.
MphasiS cuts 200 jobs in Chennai
RETRENCHMENTS are taking its toll on the Indian IT industry and the latest to join the list is MphasiS. The IT & BPO services company, which is part of the $22-billion EDS, has reportedly shed around 200 people. According to sources, MphasiS has retrenched 200 employees at its Chennai centre and all this in a span of two days last week.
MphasiS, in response to this development, said in a statement: "The query is speculatory and as per policy, MphasiS, an EDS company, does not respond to rumours and speculation." It further added, "MphasiS continues to hire people to meet business demands. The company has grown from an 11,000-employee organisation in 2006 to over 27,000-strong in 2007 and the trend will be similar in 2008."
It was not clear whether this retrenchment was restricted to the Chennai centre or covered other locations. Sources said the retrenchment was largely centered around the performance issue and it has probably affected those who were on the bench.
The recent cases of retrenchment in IT majors like TCS and IBM have centered around performance issues. However, industry observers feel it is very difficult to pinpoint whether it is performance issue or the weakness in the market which are forcing companies to take this step. At the same time, there has been a lot of flab built into a lot many companies and this could be an opportune time to cut costs as employee compensation accounts for around 40% of a typical IT services company's revenue.
According to reports, EDS' quarterly profit fell 13%, hurt by the loss of key customer Verizon Communications, which decided to handle its own technology work. Sales in the Americas declined 8%, and operating profit in the region tumbled 28%. MphasiS was one of the first Indian IT services companies to be acquired by an MNC IT company. EDS also later merged its India operations with MphasiS.
MphasiS, in response to this development, said in a statement: "The query is speculatory and as per policy, MphasiS, an EDS company, does not respond to rumours and speculation." It further added, "MphasiS continues to hire people to meet business demands. The company has grown from an 11,000-employee organisation in 2006 to over 27,000-strong in 2007 and the trend will be similar in 2008."
It was not clear whether this retrenchment was restricted to the Chennai centre or covered other locations. Sources said the retrenchment was largely centered around the performance issue and it has probably affected those who were on the bench.
The recent cases of retrenchment in IT majors like TCS and IBM have centered around performance issues. However, industry observers feel it is very difficult to pinpoint whether it is performance issue or the weakness in the market which are forcing companies to take this step. At the same time, there has been a lot of flab built into a lot many companies and this could be an opportune time to cut costs as employee compensation accounts for around 40% of a typical IT services company's revenue.
According to reports, EDS' quarterly profit fell 13%, hurt by the loss of key customer Verizon Communications, which decided to handle its own technology work. Sales in the Americas declined 8%, and operating profit in the region tumbled 28%. MphasiS was one of the first Indian IT services companies to be acquired by an MNC IT company. EDS also later merged its India operations with MphasiS.
IPO terminology
What is the difference between public issue and private placement?
When an issue is not made to only a select set of people but is open to the general public and any other investor at large, it is a public issue. But if the issue is made to a select set of people, it is called private placement. As perCompanies Act, 1956, an issue becomes public if it results in allotment to 50persons or more. This means an issue can be privately placed where an allotment is made to less than 50 persons.
What is an Initial Public Offer (IPO)?
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer's securities. The sale of securities can be either through book building or through normal public issue.
Who decides the price of an issue?
Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. There is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. There are two types of issues, one where company and Lead Merchant Banker fix a price (called fixed price) and other, where the company and the Lead Manager (LM) stipulate a floor price or a price band and leave it to market forces to determi ne the final price (price discovery through book building process).
What does 'price discovery through Book Building Process' mean?
Book Building is basically a process used in IPOs for efficient price discovery. It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer price is determined after the bid closing date.
What is the main difference between offer of shares through book building and offer of shares through normal public issue?
Price at which securities will be allotted is not known in case of offer of shares through Book Building while in case of offer of shares through normal public issue, price is known in advance to investor. Under Book Building, investors bid for shares at the floor price or above and after the closure of the book building process the price is determined for allotment of shares. In case of Book Building, the demand can be known everyday as the book is being built. But in case of the public issue the demand is known at the close of the issue.
What is Cut-Off Price?
In a Book building issue, the issuer is required to indicate either the price band or a floor price in the prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called "Cut-Off Price". The issuer and lead manager decides this after considering the book and the investors' appetite for the stock.
What is the floor price in case of book building?
Floor price is the minimum price at which bids can be made.
What is a Price Band in a book built IPO?
The prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. The price band can have a revision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing a press release and also indicating the change on the relevant website and the terminals of the trading members participating in the book building process. In case the price band is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding ten days.
Who decides the Price Band?
It may be understood that the regulatory mechanism does not play a role in setting the price for issues. It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers.
What is minimum number of days for which a bid should remain open during book building?
The Book should remain open for a minimum of 3 days.
Can open outcry system be used for book building?
No. As per SEBI, only electronically linked transparent facility is allowed to be used in case of book building.
Can the individual investor use the book building facility to make an application?
Yes.
How does one know if shares are allotted in an IPO/offer for sale? What is the timeframe for getting refund if shares not allotted?
As per SEBI guidelines, the Basis of Allotment should be completed with 15 days from the issue close date. As soon as the basis of allotment is completed, within 2 working days the details of credit to demat account / allotment advice and despatch of refund order needs to be completed. So an investor should know in about 15 days time from the closure of issue, whether shares are allotted to him or not.
How long does it take to get the shares listed after issue?
It would take around 3 weeks after the closure of the book built issue.
What is the role of a 'Registrar' to an issue?
The Registrar finalizes the list of eligible allottees after deleting the invalid applications and ensures that the corporate action for crediting of shares to the demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. The Lead Manager coordinates with the Registrar to ensure follow up so that that the flow of applications from collecting bank branches, processing of the applications and other matters till the basis of allotment is finalized, dispatch security certificates and refund orders completed and securities listed.
Does NSE provide any facility for IPO?
Yes. NSE's electronic trading network spans across the country providing access to investors in remote areas. NSE decided to offer this infrastructure for conducting online IPOs through the Book Building process. NSE operates a fully automated screen based bidding system called NEAT IPO that enables trading members to enter bids directly from their offices through a sophisticated telecommunication network.
Book Building through the NSE system offers several advantages:
The NSE system offers a nation wide bidding facility in securities It provide a fair, efficient & transparent method for collecting bids using the latest electronic trading systems Costs involved in the issue are far less than those in a normal IPO
The system reduces the time taken for completion of the issue process
The IPO market timings are from 10.00 a.m. to 3.00 p.m. On the last day of the IPO, the session timings can be further extended on specific request by the Book Running Lead Manager.
What is a Prospectus?
A large number of new companies float public issues. While a large number of these companies are genuine, quite a few may want to exploit the investors. Therefore, it is very important that an investor before applying for any issue identifies future potential of a company. A part of the guidelines issued by SEBI (Securities and Exchange Board of India) is the disclosure of information to the public. This disclosure includes information like the reason for raising the money, the way money is proposed to be spent, the return expected on the money etc. This information is in the form of 'Prospectus' which also includes information regarding the size of the issue, the current status of the company, its equity capital, its current and past performance, the promoters, the project, cost of the project, means of financing, product and capacity etc. It also contains lot of mandatory information regarding underwriting and statutory compliances. This helps investors to evaluate short term and long term prospects of the company.
What does 'Draft Offer document' mean?
'Offer document' means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue which is filed with the Registrar of Companies (ROC) and Stock Exchanges (SEs). An offer document covers all the relevant information to help an investor to make his/her investment decision.
'Draft Offer document' means the offer document in draft stage. The draft offer documents are filed with SEBI, atleast 21 days prior to the filing of the Offer Document with ROC/SEs. SEBI may specify changes, if any, in the draft Offer Document and the issuer or the lead merchant banker shall carry out such changes in the draft offer document before filing the Offer Document with ROC/SEs. The Draft Offer Document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI.
What is an 'Abridged Prospectus'?
'Abridged Prospectus' is a shorter version of the Prospectus and contains all the salient features of a Prospectus. It accompanies the application form of public issues.
Who prepares the 'Prospectus'/'Offer Documents'?
Generally, the public issues of companies are handled by 'Merchant Bankers' who are responsible for getting the project appraised, finalizing the cost of the project, profitability estimates and for preparing of 'Prospectus'. The 'Prospectus' is submitted to SEBI for its approval.
What does one mean by 'Lock-in'?
'Lock-in' indicates a freeze on the sale of shares for a certain period of time. SEBI guidelines have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons, who are controlling the company, shall continue to hold some minimum percentage in the company after the public issue.
What is meant by 'Listing of Securities'?
Listing means admission of securities of an issuer to trading privileges (dealings) on a stock exchange through a formal agreement. The prime objective of admission to dealings on the exchange is to provide liquidity and marketability to securities, as also to provide a mechanism for effective control and supervision of trading.
What is a 'Listing Agreement'?
At the time of listing securities of a company on a stock exchange, the company is required to enter into a listing agreement with the exchange. The listing agreement specifies the terms and conditions of listing and the disclosures that shall be made by a company on a continuous basis to the exchange.
What does 'Delisting of securities' mean?
The term 'Delisting of securities' means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange.
What is SEBI's Role in an Issue?
Any company making a public issue or a listed company making a rights issue of value of more than Rs 50 lakh is required to file a draft offer document with SEBI for its observations. The company can proceed further on the issue only after getting observations from SEBI. The validity period of SEBI's observation letter is three months only i.e. the company has to open its issue within three months period.
Does it mean that SEBI recommends an issue?
SEBI does not recommend any issue nor does take any responsibility either for the financial soundness of any scheme or the project for which the issue is proposed to be made or for the correctness of the statements made or opinions expressed in the offer document. SEBI mainly scrutinizes the issue for seeing that adequate disclosures are made by the issuing company in the prospectus or offer document.
Does SEBI tag make one's money safe?
The investors should make an informed decision purely by themselves based on the contents disclosed in the offer documents. SEBI does not associate itself with any issue/issuer and should in no way be construed as a guarantee for the funds that the investor proposes to invest through the issue. However, the investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. They are strongly warned against relying on any 'tips' or news through unofficial means.
Foreign Capital Issuance
Can companies in India raise foreign currency resources?
Yes. Indian companies are permitted to raise foreign currency resources through two main sources: a) issue of foreign currency convertible bonds more commonly known as 'Euro' issues and b) issue of ordinary shares through depository receipts namely 'Global Depository Receipts
(GDRs)/American Depository Receipts (ADRs)' to foreign investors i.e. to the institutional investors or individual investors.
What is an American Depository Receipt?
An American Depositary Receipt ("ADR") is a physical certificate evidencing ownership of American Depositary Shares ("ADSs"). The term is often used to refer to the ADSs themselves.
What is an ADS?
An American Depositary Share ("ADS") is a U.S. dollar denominated form of equity ownership in a non-U.S. company. It represents the foreign shares of the company held on deposit by a custodian bank in the company's home country and carries the corporate and economic rights of the foreign shares, subject to the terms specified on the ADR certificate. One or several ADSs can be represented by a physical ADR certificate. The terms ADR and ADS are often used interchangeably. ADSs provide U.S. investors with a convenient way to invest in overseas securities and to trade non-U.S. securities in the U.S. ADSs are issued by a depository bank, such as JPMorgan Chase Bank. They are traded in the same manner as shares in U.S. companies, on the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) or quoted on NASDAQ and the over-the-counter (OTC) market. Although ADSs are U.S. dollar denominated securities and pay dividends in U.S. dollars, they do not eliminate the currency risk associated with an investment in a non-U.S. company.
What is meant by Global Depository Receipts?
Global Depository Receipts (GDRs) may be defined as a global finance vehicle that allows an issuer to raise capital simultaneously in two or markets through a global offering. GDRs may be used in public or private markets inside or outside US. GDR, a negotiable certificate usually represents company's traded equity/debt. The underlying shares correspond to the GDRs in a fixed ratio say 1 GDR=10 shares.
Source:-NCFM
When an issue is not made to only a select set of people but is open to the general public and any other investor at large, it is a public issue. But if the issue is made to a select set of people, it is called private placement. As perCompanies Act, 1956, an issue becomes public if it results in allotment to 50persons or more. This means an issue can be privately placed where an allotment is made to less than 50 persons.
What is an Initial Public Offer (IPO)?
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer's securities. The sale of securities can be either through book building or through normal public issue.
Who decides the price of an issue?
Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. There is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. There are two types of issues, one where company and Lead Merchant Banker fix a price (called fixed price) and other, where the company and the Lead Manager (LM) stipulate a floor price or a price band and leave it to market forces to determi ne the final price (price discovery through book building process).
What does 'price discovery through Book Building Process' mean?
Book Building is basically a process used in IPOs for efficient price discovery. It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer price is determined after the bid closing date.
What is the main difference between offer of shares through book building and offer of shares through normal public issue?
Price at which securities will be allotted is not known in case of offer of shares through Book Building while in case of offer of shares through normal public issue, price is known in advance to investor. Under Book Building, investors bid for shares at the floor price or above and after the closure of the book building process the price is determined for allotment of shares. In case of Book Building, the demand can be known everyday as the book is being built. But in case of the public issue the demand is known at the close of the issue.
What is Cut-Off Price?
In a Book building issue, the issuer is required to indicate either the price band or a floor price in the prospectus. The actual discovered issue price can be any price in the price band or any price above the floor price. This issue price is called "Cut-Off Price". The issuer and lead manager decides this after considering the book and the investors' appetite for the stock.
What is the floor price in case of book building?
Floor price is the minimum price at which bids can be made.
What is a Price Band in a book built IPO?
The prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the cap of the price band shall not be more than 20%. In other words, it means that the cap should not be more than 120% of the floor price. The price band can have a revision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing a press release and also indicating the change on the relevant website and the terminals of the trading members participating in the book building process. In case the price band is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding ten days.
Who decides the Price Band?
It may be understood that the regulatory mechanism does not play a role in setting the price for issues. It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers.
What is minimum number of days for which a bid should remain open during book building?
The Book should remain open for a minimum of 3 days.
Can open outcry system be used for book building?
No. As per SEBI, only electronically linked transparent facility is allowed to be used in case of book building.
Can the individual investor use the book building facility to make an application?
Yes.
How does one know if shares are allotted in an IPO/offer for sale? What is the timeframe for getting refund if shares not allotted?
As per SEBI guidelines, the Basis of Allotment should be completed with 15 days from the issue close date. As soon as the basis of allotment is completed, within 2 working days the details of credit to demat account / allotment advice and despatch of refund order needs to be completed. So an investor should know in about 15 days time from the closure of issue, whether shares are allotted to him or not.
How long does it take to get the shares listed after issue?
It would take around 3 weeks after the closure of the book built issue.
What is the role of a 'Registrar' to an issue?
The Registrar finalizes the list of eligible allottees after deleting the invalid applications and ensures that the corporate action for crediting of shares to the demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. The Lead Manager coordinates with the Registrar to ensure follow up so that that the flow of applications from collecting bank branches, processing of the applications and other matters till the basis of allotment is finalized, dispatch security certificates and refund orders completed and securities listed.
Does NSE provide any facility for IPO?
Yes. NSE's electronic trading network spans across the country providing access to investors in remote areas. NSE decided to offer this infrastructure for conducting online IPOs through the Book Building process. NSE operates a fully automated screen based bidding system called NEAT IPO that enables trading members to enter bids directly from their offices through a sophisticated telecommunication network.
Book Building through the NSE system offers several advantages:
The NSE system offers a nation wide bidding facility in securities It provide a fair, efficient & transparent method for collecting bids using the latest electronic trading systems Costs involved in the issue are far less than those in a normal IPO
The system reduces the time taken for completion of the issue process
The IPO market timings are from 10.00 a.m. to 3.00 p.m. On the last day of the IPO, the session timings can be further extended on specific request by the Book Running Lead Manager.
What is a Prospectus?
A large number of new companies float public issues. While a large number of these companies are genuine, quite a few may want to exploit the investors. Therefore, it is very important that an investor before applying for any issue identifies future potential of a company. A part of the guidelines issued by SEBI (Securities and Exchange Board of India) is the disclosure of information to the public. This disclosure includes information like the reason for raising the money, the way money is proposed to be spent, the return expected on the money etc. This information is in the form of 'Prospectus' which also includes information regarding the size of the issue, the current status of the company, its equity capital, its current and past performance, the promoters, the project, cost of the project, means of financing, product and capacity etc. It also contains lot of mandatory information regarding underwriting and statutory compliances. This helps investors to evaluate short term and long term prospects of the company.
What does 'Draft Offer document' mean?
'Offer document' means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue which is filed with the Registrar of Companies (ROC) and Stock Exchanges (SEs). An offer document covers all the relevant information to help an investor to make his/her investment decision.
'Draft Offer document' means the offer document in draft stage. The draft offer documents are filed with SEBI, atleast 21 days prior to the filing of the Offer Document with ROC/SEs. SEBI may specify changes, if any, in the draft Offer Document and the issuer or the lead merchant banker shall carry out such changes in the draft offer document before filing the Offer Document with ROC/SEs. The Draft Offer Document is available on the SEBI website for public comments for a period of 21 days from the filing of the Draft Offer Document with SEBI.
What is an 'Abridged Prospectus'?
'Abridged Prospectus' is a shorter version of the Prospectus and contains all the salient features of a Prospectus. It accompanies the application form of public issues.
Who prepares the 'Prospectus'/'Offer Documents'?
Generally, the public issues of companies are handled by 'Merchant Bankers' who are responsible for getting the project appraised, finalizing the cost of the project, profitability estimates and for preparing of 'Prospectus'. The 'Prospectus' is submitted to SEBI for its approval.
What does one mean by 'Lock-in'?
'Lock-in' indicates a freeze on the sale of shares for a certain period of time. SEBI guidelines have stipulated lock-in requirements on shares of promoters mainly to ensure that the promoters or main persons, who are controlling the company, shall continue to hold some minimum percentage in the company after the public issue.
What is meant by 'Listing of Securities'?
Listing means admission of securities of an issuer to trading privileges (dealings) on a stock exchange through a formal agreement. The prime objective of admission to dealings on the exchange is to provide liquidity and marketability to securities, as also to provide a mechanism for effective control and supervision of trading.
What is a 'Listing Agreement'?
At the time of listing securities of a company on a stock exchange, the company is required to enter into a listing agreement with the exchange. The listing agreement specifies the terms and conditions of listing and the disclosures that shall be made by a company on a continuous basis to the exchange.
What does 'Delisting of securities' mean?
The term 'Delisting of securities' means permanent removal of securities of a listed company from a stock exchange. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange.
What is SEBI's Role in an Issue?
Any company making a public issue or a listed company making a rights issue of value of more than Rs 50 lakh is required to file a draft offer document with SEBI for its observations. The company can proceed further on the issue only after getting observations from SEBI. The validity period of SEBI's observation letter is three months only i.e. the company has to open its issue within three months period.
Does it mean that SEBI recommends an issue?
SEBI does not recommend any issue nor does take any responsibility either for the financial soundness of any scheme or the project for which the issue is proposed to be made or for the correctness of the statements made or opinions expressed in the offer document. SEBI mainly scrutinizes the issue for seeing that adequate disclosures are made by the issuing company in the prospectus or offer document.
Does SEBI tag make one's money safe?
The investors should make an informed decision purely by themselves based on the contents disclosed in the offer documents. SEBI does not associate itself with any issue/issuer and should in no way be construed as a guarantee for the funds that the investor proposes to invest through the issue. However, the investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. They are strongly warned against relying on any 'tips' or news through unofficial means.
Foreign Capital Issuance
Can companies in India raise foreign currency resources?
Yes. Indian companies are permitted to raise foreign currency resources through two main sources: a) issue of foreign currency convertible bonds more commonly known as 'Euro' issues and b) issue of ordinary shares through depository receipts namely 'Global Depository Receipts
(GDRs)/American Depository Receipts (ADRs)' to foreign investors i.e. to the institutional investors or individual investors.
What is an American Depository Receipt?
An American Depositary Receipt ("ADR") is a physical certificate evidencing ownership of American Depositary Shares ("ADSs"). The term is often used to refer to the ADSs themselves.
What is an ADS?
An American Depositary Share ("ADS") is a U.S. dollar denominated form of equity ownership in a non-U.S. company. It represents the foreign shares of the company held on deposit by a custodian bank in the company's home country and carries the corporate and economic rights of the foreign shares, subject to the terms specified on the ADR certificate. One or several ADSs can be represented by a physical ADR certificate. The terms ADR and ADS are often used interchangeably. ADSs provide U.S. investors with a convenient way to invest in overseas securities and to trade non-U.S. securities in the U.S. ADSs are issued by a depository bank, such as JPMorgan Chase Bank. They are traded in the same manner as shares in U.S. companies, on the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) or quoted on NASDAQ and the over-the-counter (OTC) market. Although ADSs are U.S. dollar denominated securities and pay dividends in U.S. dollars, they do not eliminate the currency risk associated with an investment in a non-U.S. company.
What is meant by Global Depository Receipts?
Global Depository Receipts (GDRs) may be defined as a global finance vehicle that allows an issuer to raise capital simultaneously in two or markets through a global offering. GDRs may be used in public or private markets inside or outside US. GDR, a negotiable certificate usually represents company's traded equity/debt. The underlying shares correspond to the GDRs in a fixed ratio say 1 GDR=10 shares.
Source:-NCFM
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