Commercial real estate loans to get costlier

RBI has tightened the screws on bank lending to the real estate sector - a move that did not go down favourably with the stocks of real estate companies. The BSE realty index fell by over six per cent.

All the realty stocks ended in the red. Sensex stock, Unitech plunged 7.5 per cent to Rs 86 after toucing a low of Rs 84. DLF tumbled 6.5 per cent to Rs 402. Omaxe crashed 10 per cent to Rs 107. HDIL tanked 8.6 per cent to Rs 341. Ansal Infrastructure shed 8.5% to Rs 69. Parsvnath, Phoenix Mills, Peninsular Land, Ackruti City and Orbitco slumped 5-7 per cent each.

Last December, real estate developers heaved a sigh of relief when the RBI allowed restructuring of loans up to June 30, 2009 as a part of its stimulus package. Since then, all major companies rescheduled loans worth crores to avoid default. but now, the RBI has had a change of heart.

Today the RBI says, “In view of large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances, it would be prudent to build cushion against likely NPAs.”

The central bank has concerns on the ability of developers to repay loans even at a later date. So, the provisioning requirement for advances to the sector has been increased from its present 0.4 to 1 per cent. This means the interest cost for developers is set to increase. DLF and Unitech have an average interest cost of about 12 per cent which is set to rise to about 12.75 or 13 per cent.

Developers are yet to get clarity on whether this provisioning will increase on existing bank loans. In fact, in the past six months, very few fresh loans have been sanctioned to real estate companies. So the RBI is sending out a clear signal for banks to be cautious even before the cycle of fresh lending begins

Brokerages point out that RBI's move may trigger a second round of equity funding for listed players. Listed companies have lapped up more than Rs 13000 crore rupees via qualified institutional placements in the past seven months. Some of these funds have been directed towards working capital needs. What’s more, about $ 3 billion is waiting in the wings to be raised via the IPO route by six companies. But for unlisted companies, funding options may be far lesser. for consumers, this move seals all possibilities for a further dip in prices. In fact, it is all set to increase

Sarang Wadhawan, Managing Director, HDIL, said, “You have to understand that the sector was just recovering, this will definitely affect developers in a way that projects which were under execution. Now we will have to increase prices to compensate for this cost that will be incurred, at the same time, affordable housing segment will be hit because of this.”

Even as companies have clocked in good volume in sales over the past two quarters, it remains to be seen whether an imminent price increase will sustain the recent uptick in demand.

Tata Steel India Q2 net down 49.5 pct, lags forecast

MUMBAI, Oct 27 (Reuters) - Tata Steel Ltd (TISC.BO: Quote, Profile, Research), the world's No. 8 steel maker by output, on Tuesday reported a 49.5 percent fall in September quarter profit from its Indian operations, as prices tumbled on the back of the global economic crisis. The company, which acquired Europe's second-largest steelmaker Corus in 2007, said standalone net profit fell to 9.03 billion rupees ($192 million) for the fiscal second quarter, from 17.88 billion reported a year earlier. Net sales fell to 56.3 billion rupees from 67.3 billion. A Reuters poll of 11 analysts had estimated a standalone net profit of 10.2 billion rupees on net sales of 60.67 billion rupees. Tata Steel bought European steel maker Corus in 2007. The Indian operations account for about a quarter of the group's annual global capacity of 30 million tonnes. Global steel production has tumbled this year, as demand from key industries such as construction and automotive shrank. But as macroeconomic data improves and inventories deplete, demand is gradually coming back, encouraging steelmakers to restart some idled capacity. Shares in Tata Steel, valued at about $10.1 billion, fell as much 7.3 percent to 501.35. The shares rose 30.6 percent in the September quarter, outperforming the benchmark index that improved 18.2 percent. ($1=47 rupees) (Reporting by Prashant Mehra; Editing by Jarshad Kakkrakandy)

Kotak Mahindra net surges 86% to Rs 299 cr

Private sector lender Kotak Mahindra Bank today reported 86.22 per cent rise in its net profit at 299.76 crore for the second quarter ended September 30, 2009, over the same period last year.

Total income rose to Rs 2,312.91 crore in the latest quarter ended September 30, 2009, up 25.05 per cent from Rs 1,849.51 crore in the same period corresponding fiscal, Kotak Mahindra Bank said in a filing to the Bombay Stock Exchange(BSE).

On standalone basis, the bank reported a net profit of Rs 125.90 crore for the July-September quarter, jumped over two-folds to Rs 47.86 crore in the same period last fiscal.

Shares of Kotak Mahindra Bank were trading at Rs 764.10 on the BSE, down 2.18 per cent from its previous close.

Rupee ended down at a three-week low against the US dollar

Rupee ended down at a three-week low against the US dollar today because banks bought the greenback noting the decline in local share indices and also to meet importers' month-end dollar demand, dealers said.
The Indian unit ended at 46.9200 rupees compared with 46.6500 per dollar Monday. Rupee swayed in the 46.7700-47.0050 per dollar band intraday today.
"The fall in local shares today triggered some FII outflows today. There was no direct impact of the RBI policy on rupee. Intraday, rupee purely tracked local share," said a dealer with a large UK bank.
Today, the Bombay Stock Exchange's Sensex and the National Stock Exchange's Nifty ended down 2.31% and 2.50%, respectively, on disappointment over the Reserve Bank of India's mid-term monetary policy review for 2009-10
(Apr-Mar).
RBI kept the Repo, Reverse Repo, and Cash Reserve Ratio unchanged as per market expectations, Statutory Liquidity Ratio was hiked to 25%. Gross domestic product growth projection for 2009-10 (Apr-Mar) was kept unchanged
at 6.0% with an upside bias.
RBI also discontinued the refinance windows for banks and foreign exchange swap facility for banks today.
"It (foreign exchange swap facility) was a measure introduced last year when market faced the problem of dollar crunch. Not many banks used it. So it may not have an impact on the forex market," said S. Rajendran, general manager treasury, Union Bank of India.
"Importers were persistently buying dollars in the market today to meet their month-end needs that added to the fall and dragged rupee to the 47 level," said a dealer with a state-owned bank.
Banks also purchased the greenback noting its rise against other Asian currencies, dealers said.
Euro's fall below the $1.5000 mark in the overnight market also added to the Indian units' woes, dealers said.
However, dollar sales from exporters prevented a further decline in the Indian currency, dealers said.
"Exporters had to step in to sell dollars with rupee weakening to 47.00 today. Those exporters who had missed a chance to sell dollars in the past few days, sold it today," said a dealer with a US bank.
Bouts of profit booking also limited the slide in the Indian currency today, dealers said.

Mahindra Renault clarifies on 'Sandero' brand

Hyundai Motor India has taken Mahindra Renault to the Delhi High Court objecting to the latter's plan to launch a compact car in the country with the name 'Sandero' alleging that the rival was trying to cash in on its popular brand Santro with a similar sounding product. They (Mahindra Renault) are planning to launch Sandero, which is very similar sounding to our Santro. Both are hatchbacks and Santro is an established trademark and they are trying to get mileage out of it," a senior Hyundai Motor India (HMIL) official told PTI.

HMIL's plea requests the court not to allow Mahindra Renault to launch the car under the name Sandero, he added.

Neither a call made to Mahindra Renault Chief Executive Officer Nalin Mehta nor an e-mail sent to Mahindra & Mahindra group spokesperson seeking comments on the development got a reply.

'Santro' is HMIL's flagship brand and a total of over 15 lakh units have been sold both in the domestic and the overseas markets since its launch in September 1998.

On the other hand, Mahindra Renault has been struggling to mark its presence in the Indian car market with its sole product Logan failing miserably sparking speculations of a break-up of the joint venture between Mahindra & Mahindra and French auto major Renault.

Market analysts pointed out that the firm desperately needs another product to keep the JV alive.

GMR Energy drags Ministry of Power, REC, PFC to Delhi HC

GMR Energy has filed three petitions against the ministry of power and two PSUs — Rural Electrification Corporation and Power Finance Corporation — which had invited bids from the private sector to set up three transmission projects.

According to the petition, GMR Energy was disqualified on the ground that the formula for calculation of Internal Resource Generation (IRG), one of the criteria for qualification, was not correct.

In its petition filed through law firm Link Legal, GMR submitted before the court that it had sought an opinion from the Institute of Charted Accountants (ICAI) on the issue.

The ICAI said the formula adopted by it for calculation of IRG is correct and acceptable, and in fact, compliant with well-established accounting standards, GMR Energy submitted in the petition.

The company submitted that it was disqualified on a faulty criteria adopted for calculating the IRG and requested the court to stay the tendering process.

Admitting it, a division bench comprising Justice B D Ahmed and Justice Veena Birbal has issued notice to the Centre, REC and PFC directing them to file their replies.The court has listed the matter for next hearing in November.

Stock-split plan electrifies Bajaj Electricals

Bajaj Electricals gained 4.38% to Rs 762 at 13:58 IST on BSE, after the company’s board approved a 5-for-1 stock split.
The company made this announcement during trading hours today, 12 October 2009.
Meanwhile, the BSE Sensex was up 303.17 points, or 1.82%, to 16,945.83.
On BSE, 57,310 shares were traded in the counter as against an average daily volume of 11,938 shares in the past one quarter.
The stock hit a high of Rs 780.20 so far during the day, which is a record high for the counter. The stock hit a low of Rs 735 so far during the day. The stock had hit a 52-week low of Rs 135 on 6 March 2009.
The stock has risen 24.36% in just five trading sessions from a recent low of Rs 612.75 on 5 October 2009.
The mid-cap stock outperformed the market over the past one month till 9 October 2009, rising 19.69% as compared to the Sensex’s 2.84% rise. It had also outperformed the market in the past one quarter, soaring 94.34% as compared to the Sensex’s return of 20.97%.
The company’s equity capital is Rs 17.44 crore. Face value per share is Rs 10.
The current price of Rs 762 discounts the company’s Q1 June 2009 annualized EPS of Rs 37.85, by a PE multiple of 20.13.
The board has also decided to raise Rs 175 crore through qualified institutional placements (QIPs). If one assumes that the company raises Rs 175 crore at the current market price of Rs 762, there will be a equity dilution of 13.17%.
Bajaj Electricals’ net profit surged 63.4% to Rs 16.36 crore on 15.1% rise in net sales to Rs 365.38 crore in Q1 June 2009 over Q1 June 2008.
Bajaj Electricals manufactures electric fans and general lighting items, such as lamps, special lamps, fluorescent tubes, and lighting fixtures. The company also manufactures consumer durables like small electrical appliances.
Promoters have pledged 2.50 lakh shares representing 1.45% of the equity capital of the company (as on 30 June 2009). Total promoters shareholding in the company is 74.14% (as on 30 June 2009).

Buying gold? Consider this instead...

Meanwhile, the yellow metal gold continues to flirt with its all time high levels. Last heard, it was comfortably perched well above the US$ 1,000 per ounce mark. And it may not be done yet by any stretch of imagination. Experts are of the opinion that it could easily double from here. And that includes Jim Rogers, one of the world's most respected commodity investors. Speaking to Moneynews, the fiery Rogers opined, "If you go back and adjust . . . for inflation back in 1980, gold should be over $2,000 an ounce. In my view it will get there again sometime in the next decade." Please note the last few words. He believes that gold would double sometime in the next decade. In other words, it may have started to look stretched from a near term perspective. In fact, even Rogers is not buying at current levels. But he also mentioned that if it goes down from here, he could once again start buying.

While awaiting a dip in gold prices could be the best thing to do right now, you may not want to do the same for silver and instead start buying today itself. Yes, you've read that right. Taking into account the fundamentals, silver is looking more attractive than gold from a long term perspective. In fact, it has already beaten the yellow metal so far this year, rising three times more than the 17% returns earned by gold. Moreover, the fundamentals of silver seem to be more compelling than that of the yellow metal. As per DNA Money, the amount of silver out there is just 20% of the gold and secondly, silver due to its best in class heat and electrical conductivity and versatility could be used into a lot of applications, thus making it far more useful than just being a storehouse of value. In view of these factors, silver definitely needs to be considered seriously if one has to diversify away from fiat currencies.

IPOs are trading below their offer price

IPOs in India, which were pushed under the carpet when the stock markets plunged, have started resurfacing now that markets have rallied. Given the buoyant mood in the markets, we are hardly surprised at companies wanting to capitalize on this opportunity. The interesting thing, however, is that many of the recent IPOs that have come in the market are trading below the offer price. And this could probably be because the underlying businesses do not have much to offer that can be justified by the price asked for. Investors are also getting savvier and are not interested in investing in IPOs merely for listing gains. This is a wakeup call for other companies lining up to be listed on the bourses as it highlights the fact that a mere revival in the stock markets is not a good enough reason to expect investors to invest in their issues.

Pipavav Shipyard to bid for defence, oil and gas projects

Pipavav Shipyard ended its first trading session at a discount of 1.72% to its issue price of Rs 58. The share closed at Rs 57 on the NSE. It touched an intraday high of Rs 61.10 and intraday low of Rs 53.85. The total traded quantity was 8,11,64,726 shares and turnover was at Rs 46685.95 lakh. Talking on the listing, Pipavav Shipyard’s Chairman Nikhil Gandhi said the company was in the process of putting bids for defence and oil and gas projects. The company, he said, had put tenders worth Rs 7,500 crore for defence projects. Gandhi added that he saw FY10 revenues at Rs 800–1,000 crore. Ravi Kapoor, Managing Director and Head, Equity Capital Markets, Citigroup, said that the company may see additional USD 15 billion fund raising by FY10. Here is a verbatim transcript of the exclusive interview with Nikhil Gandhi, Luv Chhabra, Director-Corporate Affairs, Punj Lloyd and Ravi Kapoor on CNBC-TV18. Also watch the accompanying video. Q: We heard yesterday about the two large deals that you were in conversations with, with naval forces both in Oman and in India- what are the chances at this point that they fructify and what would that mean to your order book? Gandhi: It is always our endeavour to put in the best possible bids which would satisfy the clients and also make sure that our EBITDA margin is not compromised. Having build world-class infrastructure, we will have slight upper hand over several other international companies of our stature and size. I believe that Pipavav has good chance to put in competitive bids. Q: Which ones do you think have higher chances of coming through because the Oman orders totally the bids are about USD 4 million and the Indian naval order is about 1.3? These are the kind of orders that investors would like you to book now from the naval and the defence side, which do you think you have a better shot at? Gandhi: We are the first company in the private sector approved by the Oman Ministry of Defence. They have looked at our facilities and this is a world class infrastructure, and hopefully, they may want to use these facilities and that is one of the reasons they have approved our company. So we are very positive about these developments. And it’s a nice situation to be in on the first day to be starting business with some of the top Indian entities like Navy and Coast Guard. Royal Navy in the Oman has also approved us as a warship builder, primarily, because of experience of our partner Punj Lloyd and the infrastructure that we have build here, would perhaps be a point which might tilt the decision in our favour. Q: Are you expecting to see a bit of supply pressure though in the first few days before Pipavav finally settles down? Kapoor: It is quite imminent. In every listing’s first two-three days there are huge volumes and I am sure this is going to be no different. Investors would like to sell and buy quite heavy volumes. I guess the volumes will settle and the stock will find its rightful place, and thereafter, obviously, it will have to perform as per the potential which is huge. Q: You will be more at liberty now to talk about growth as you see it, not so much for FY10 what kind of target can you hold out for FY11 and FY12 now to your investors? Gandhi: First and foremost we are right now in the receipt of extremely large tender from both national and international defence agencies. We are in the process of putting in the tenders together. We have already put in worth about Rs 7,500 crore plus to the Indian Naval authorities. We are in the process of putting in rest of the bids to the different potential client both in oil and gas sector, defence sector and international potential customers. Since we have built first of its kind in the country, a most modern state of art engineering complex, fabrication complex and dry dock attached to it, people are not only excited about building their assets here. It is because of the kind of infrastructure we have set up for example loss of wastage of steel, etc. which will be very less compared to any other similar facilities in the country. We are quite upbeat about ramping up the revenues. The current year revenue is likely to be in the region of Rs 800–1000 crore. The ramping-up would be pretty rapid because we do have the capacity and the potential clients want fast forward the deliveries of their requirements and there is a huge pent up demand in the country. I think we would be in for a significant excitement going forward. Q: What's in your eyes the possibility of Pipavav bagging the Oman or the Indian Naval order? Chhabra: I would leave that to Mr. Gandhi to reply. I think there is much or equally large opportunity that we have spoken about and that’s really the offshore oil and gas opportunity. If you look at the spends, just by ONGC, that are planned on the offshore side over the next five–years it is likely to be in excess of USD 20 billion. The combination of Pipavav and Punj Lloyd will be a formidable combination to address this market. The facilities in Pipavav are world-class. They are one of a kind; certainly unmatched in India. The ability to construct and fabricate platforms, jackets and then the ability of Punj Lloyd to lay the offshore pipelines, erect the platforms is a huge opportunity here. So the opportunities will be on the naval side as Nikhil Gandhi mentioned. There will be an equally large opportunity that Pipavav will address on the offshore oil and gas side and then going forward as the shipyard develops and gets more experience there will be another opportunity which is really on static equipment and on the nuclear side which is really to fabricate nuclear components for reactors and other pressure vessels. Q: Last we spoke you said you were expecting to see a USD 12–15 billion by way of paper that will hit the primary market in whatever form for the rest of this year. Do you think that figure might actually get surpassed and how much of this is impacting what is happening in the currency markets because you are in a good place to talk about that? Kapoor: I still maintain that USD 12–15 billion or maybe the way it is looking like the pipelines are building up on capital raising programmes on a daily basis, IPOs are queuing up with Sebi. Therefore, the number could be in excess of USD 15 billion by the time we finish this year. We have already raised about USD 16–16.5 billion in the first 4–5 months ever since you have seen these markets moving back and liquidity coming back into the country, so I still maintain that number. I would imagine that it would primarily comprise of QIPs and IPOs, essentially, from the real estate sector, power sector infrastructure construction sector. The QIP also the pipeline is quite heavy and you have seen new structures are coming up to clear the QIP pipeline. Finally, as I have been maintaining on your programme that the government disinvestment is inevitable you must have seen RECs going through the process and couple of other companies will come up for disinvestment in the next six months of this financial year. So there would be a fairly busy pipeline. The flows are coming in and needless to say it is going to help the currency upwards, the currency is likely to appreciate in the short-term because lot of liquidity is coming in.

REC board meet on October 16 to mull follow on public offer

A meeting of the board of directors of Rural Electrification Corporation (REC) will be held on October 16, 2009, inter alia, to consider the proposal for issue of fresh Equity Shares through Follow on Public Offer (FPO), pending receipt of approval of the Government of India, and to seek approval of shareholders for the same by convening Extra Ordinary General Meeting (EGM), as per BSE announcement.

Euro Multivision to list on Oct 15

Euro Multivision, manufacturer of compact disc recordables (CDRs) and digital versatile disc recordables (DVDRs), will list its equity shares issued via public issue on the exchanges on October 15, 2009. It came out with an initial public offering (IPO) of 88 lakh equity shares during September 22-24, 2009. The company fixed the issue price at Rs 75 per share which was subscribed 1.81 times. The company raised Rs 66 crore via this issue. Promoters' shareholding has been reduced to 51.12% from 81.11% post the issue. Euro Multivision is the second largest company among few companies that are into manufacturing of CDRs and DVDRs (Source: Optical Disk Manufacturers Welfare Association). The other companies in the existing business are MoserBaer, Jupitar Innovations, Optek Disc manufacturing and Lizer Technologies etc. It is a part of EURO group which was promoted by Shri Nenshi Shah.

IL&FS to list transport network arm, raise Rs 700cr

IL&FS wants to raise around Rs 700 crore by taking its surface transportation arm, IL&FS Transportation Network, to the bourses. Anumeet Kaur Bisen reports.

IL&FS Transport Network, India's largest private sector player engaged in the build-operate-transfer (BOT) model for roads and highways wants to raise Rs 700 crore. For this, it plans to list on the stock exchanges. The move will involve private equity fund Trinity Capital selling its entire 2.5% in the company.

Of the proceeds, Rs 500 crore will be used to repay part of the Rs 1,854 crore consolidated debt on its books.

The loans that will be paid off are: a Rs 100-crore short-term unsecured loan from Allahabad Bank, Rs 100 crore unsecured loan from Canara Bank, Rs 100 crore from group company IL&FS Securities Services. And two loans of Rs 100 crore rupees each from United Bank of India.

Paying off this debt will serve two purposes. One, it will bring the company's debt-equity ratio down from the current 1.9. Two, it will improve its debt leveraging capacity and provide better opportunity for funding future projects.

The issue is expected to hit the markets by late 2009 or early 2010. The company says it may also go in for a pre-IPO placement exercise.

Some of the proceeds may also be used to expand low-margin overseas operations. That's because its overseas operations under Spanish arm Elsamex provides ITNL with the bulk of its revenues.

However, there is a question over the company's revenue generation capacity. Considering Elsamex has been generating losses in the past and may continue to do so for a while yet.

Man Infraconstruction files DRHP for IPO

Man Infraconstruction has filed a draft red herring prospectus (DRHP) for its proposed 100% book built public issue of 5,625,150 equity shares of face value of Rs 10 each.

It has been promoted by Parag Shah and Mansi Shah and is headquartered in Mumbai. The company provides construction services for port infrastructure, residential, industrial, commercial and road infrastructure projects.

The book running lead managers to the proposed IPO are IDFC-SSKI Ltd and Edelweiss Capital Ltd.

Should you subscribe to I'bulls Power IPO?

Indiabulls Power's initial public offer (IPO) has received an overwhelming response from the first day itself. The issue has been subscribed 7.2 times so far with the QIB (qualified institutional investors) portion being subscribed 13.3 times. The price band has been fixed at Rs 40-45 per equity share. The minimum bid lot is 150 equity shares and in multiples of 150 shares thereafter. The issue will close on October 15, 2009.

However, Bhargav Vuddhadev of Noble Group advises investors not to subscribe to Indiabulls Power issue. He cites uncertainty over the power purchase agreement for Amaravati Phase 1, doubts on commerciality of Bhaiyathan plant, value creation, and equity dilution as reasons.

SP Tulsian of sptulsian.com doesn't see the fair price for Indiabulls Power above Rs 40. He advises investors to subscribe at Rs 40. "Retail investors should be cautious."

Here is a verbatim transcript of the exclusive interview with Bhargav Vuddhadev and SP Tulsian on CNBC-TV18. Also see the accompanying video.

Q: From your assessment of the issue and its valuations do you think it’s an attractive one or you would rather pass?

Vuddhadev: We are recommending clients not to subscribe to Indiabulls Power mainly because of three reasons, (1) we anticipate equity dilution risk in the near-term because we do not think there would be any operational capacity until FY12 and hence there won’t be any internal accruals to meet the USD 12 billion equity requirement for the Bhaiyathan power project (2) there are uncertainties over power purchase agreements (PPA) for Amravati Phase-I and Nashik power project. Also, the pricing for the former is not known. The PPAs is still not signed and (3) there is little value creation that we see from the Bhaiyathan power project given that 65% of the capacity is sold at 81 paise per unit as against cash operating cost of 65 paise per unit. Because of these three reasons we are recommending clients not to subscribe for this initial public offering (IPO).

Q: What is your call on the Indiabulls Power IPO?

Tulsian: I do not think that the issuers or the merchant bankers have really leant the lessons. If we see the four issues which have hit the capital market in last maybe three months or so, 75% have disappointed the in the form of two power IPOs being Adani and National Hydroelectric Power Corporation (NHPC) and third Pipavav. Only the Oil India Ltd (OIL) has awarded shareholders.

If one compares Indiabulls Power with Adani Power, the latter has a capacity of 6,600 MW while Indiabulls Power has been talking of 6,600 MW. However, Indiabulls Power has only two power projects of 1,320 mw each, which means the real capacity or the serious creation is in respect to 2,640 MW.

If I go by the same parameters of Adani Power in terms of the marketcap, Rs 22,000 crore because financing pattern has been broadly on the lines of 70:30 which we have seen in case of Adani Power, same here in case of Indiabulls Power. I go by the marketcap parameters Rs 22,000 crore market cap has been given to Adani Power. So, 40% of that gives 8,800 crore. If I go by the total number of issue share, that gives me a valuation of Rs 43 per share.

Since the price band has been fixed at Rs 40-45, I don’t think there is any justification for the share price or the book to get discovered more than Rs 40. In the case of the retail category, we see that all of them go for the cut off and for some reason we have seen that the issue has subscribed by about 7.2 times on an overall basis. But entire contribution is coming from qualified institutional buyers (QIB) category.

In any situation, firstly there is no compulsion on part of the investors to go for the issue. If they opt to and make a strict comparison with Adani Power, the right price at which it should get discovered is Rs 40 since they have already fixed the price band of Rs 40-45 because otherwise there are all the chances of prospective investors making losses in the issue.

Q: How would you put or ascribe a valuation given the two points that you made about the PPA concerns and the pricing issues. Given cash flow expectations from FY12 to FY14, what is a fair value in your eyes?

Vuddhadev: We have done a discounted cash flow (DCF) valuation for all the three power projects Amravati phase-I, Nashik power project, and Bhaiyathan power project and our DCF valuation comes to approximately Rs 36 per share.

Q: What you have worked in by way of a merchant power capacity and a merchant power price per unit as well?

Vuddhadev: We are assuming a merchant power price per unit of roughly Rs 5 per unit starting FY13 and we are reducing that by 50 paise per unit every year until FY17. From FY17, we will have a constant merchant power price of roughly Rs 3 per unit.

Q: In terms of capacity and price for merchant power, how does it compare with Adani Power?

Tulsian: I don’t think one can take a price of more than Rs 3.50 for merchant power if you take the project completion time after FY12 which is happening in case of Indiabulls Power. When I compare that with Adani Power, the same thing has got factored in because you have the correct indication of Adani Power in the form of the share having listed and that’s the reason I have compared that with the market cap of the company and given 40% of that because you do not see any big jump happening in case of merchant power realisation from FY12 onwards.

Bonuses on LIC policies are taxable: Revenue Secy

The new Direct Tax Code does not seem friendly towards investors of LIC policies. Revenue Secretary PV Bhide today indicated that bonus amounts received on maturity of LIC policies will be liable to tax. "The broad principle is whatever has accrued by March 31 will remain with you as benefit. But that does not apply to bonuses paid after that." He also ruled out any tax concession for special economic zones under the new Direct Tax Code. "We are looking at long gestation period projects separately."

Unitech delays project delivery; homebuyers see red

Even though Unitech succesfully raised nearly USD 900 million via two qualified institutional placement (QIP) issues, the country's second largest realty firm is lagging behind in construction. This resulted in nearly 250 angry home-buyers of the Unitech Habitat in Greater Noida gathered today outside the company's headquarters to protest against late delivery. Unitech Habitat, a residential development, was supposed to be delivered by June 2009. Construction is still on and will take some time before apartments here are handed over to the buyers.

Pipavav Shipyard to bid for defence, oil and gas projects

MoneyMorning.com/India_stocks

Pipavav Shipyard ended its first trading session at a discount of 1.72% to its issue price of Rs 58. The share closed at Rs 57 on the NSE. It touched an intraday high of Rs 61.10 and intraday low of Rs 53.85. The total traded quantity was 8,11,64,726 shares and turnover was at Rs 46685.95 lakh.

Talking on the listing, Pipavav Shipyard’s Chairman Nikhil Gandhi said the company was in the process of putting bids for defence and oil and gas projects.

The company, he said, had put tenders worth Rs 7,500 crore for defence projects. Gandhi added that he saw FY10 revenues at Rs 800–1,000 crore.

Ravi Kapoor, Managing Director and Head, Equity Capital Markets, Citigroup, said that the company may see additional USD 15 billion fund raising by FY10.

Here is a verbatim transcript of the exclusive interview with Nikhil Gandhi, Luv Chhabra, Director-Corporate Affairs, Punj Lloyd and Ravi Kapoor on CNBC-TV18. Also watch the accompanying video.

Q: We heard yesterday about the two large deals that you were in conversations with, with naval forces both in Oman and in India- what are the chances at this point that they fructify and what would that mean to your order book?
Gandhi: It is always our endeavour to put in the best possible bids which would satisfy the clients and also make sure that our EBITDA margin is not compromised. Having build world-class infrastructure, we will have slight upper hand over several other international companies of our stature and size. I believe that Pipavav has good chance to put in competitive bids.

Q: Which ones do you think have higher chances of coming through because the Oman orders totally the bids are about USD 4 million and the Indian naval order is about 1.3? These are the kind of orders that investors would like you to book now from the naval and the defence side, which do you think you have a better shot at?

Gandhi: We are the first company in the private sector approved by the Oman Ministry of Defence. They have looked at our facilities and this is a world class infrastructure, and hopefully, they may want to use these facilities and that is one of the reasons they have approved our company. So we are very positive about these developments. And it’s a nice situation to be in on the first day to be starting business with some of the top Indian entities like Navy and Coast Guard. Royal Navy in the Oman has also approved us as a warship builder, primarily, because of experience of our partner Punj Lloyd and the infrastructure that we have build here, would perhaps be a point which might tilt the decision in our favour.

Q: Are you expecting to see a bit of supply pressure though in the first few days before Pipavav finally settles down?
Kapoor: It is quite imminent. In every listing’s first two-three days there are huge volumes and I am sure this is going to be no different. Investors would like to sell and buy quite heavy volumes. I guess the volumes will settle and the stock will find its rightful place, and thereafter, obviously, it will have to perform as per the potential which is huge.

Q: You will be more at liberty now to talk about growth as you see it, not so much for FY10 what kind of target can you hold out for FY11 and FY12 now to your investors?
Gandhi: First and foremost we are right now in the receipt of extremely large tender from both national and international defence agencies. We are in the process of putting in the tenders together. We have already put in worth about Rs 7,500 crore plus to the Indian Naval authorities. We are in the process of putting in rest of the bids to the different potential client both in oil and gas sector, defence sector and international potential customers.

Since we have built first of its kind in the country, a most modern state of art engineering complex, fabrication complex and dry dock attached to it, people are not only excited about building their assets here. It is because of the kind of infrastructure we have set up for example loss of wastage of steel, etc. which will be very less compared to any other similar facilities in the country. We are quite upbeat about ramping up the revenues. The current year revenue is likely to be in the region of Rs 800–1000 crore. The ramping-up would be pretty rapid because we do have the capacity and the potential clients want fast forward the deliveries of their requirements and there is a huge pent up demand in the country. I think we would be in for a significant excitement going forward.

Q: What's in your eyes the possibility of Pipavav bagging the Oman or the Indian Naval order?

Chhabra: I would leave that to Mr. Gandhi to reply. I think there is much or equally large opportunity that we have spoken about and that’s really the offshore oil and gas opportunity. If you look at the spends, just by ONGC, that are planned on the offshore side over the next five–years it is likely to be in excess of USD 20 billion. The combination of Pipavav and Punj Lloyd will be a formidable combination to address this market. The facilities in Pipavav are world-class. They are one of a kind; certainly unmatched in India. The ability to construct and fabricate platforms, jackets and then the ability of Punj Lloyd to lay the offshore pipelines, erect the platforms is a huge opportunity here.

So the opportunities will be on the naval side as Nikhil Gandhi mentioned. There will be an equally large opportunity that Pipavav will address on the offshore oil and gas side and then going forward as the shipyard develops and gets more experience there will be another opportunity which is really on static equipment and on the nuclear side which is really to fabricate nuclear components for reactors and other pressure vessels.

Q: Last we spoke you said you were expecting to see a USD 12–15 billion by way of paper that will hit the primary market in whatever form for the rest of this year. Do you think that figure might actually get surpassed and how much of this is impacting what is happening in the currency markets because you are in a good place to talk about that?
Kapoor: I still maintain that USD 12–15 billion or maybe the way it is looking like the pipelines are building up on capital raising programmes on a daily basis, IPOs are queuing up with Sebi. Therefore, the number could be in excess of USD 15 billion by the time we finish this year. We have already raised about USD 16–16.5 billion in the first 4–5 months ever since you have seen these markets moving back and liquidity coming back into the country, so I still maintain that number.

I would imagine that it would primarily comprise of QIPs and IPOs, essentially, from the real estate sector, power sector infrastructure construction sector. The QIP also the pipeline is quite heavy and you have seen new structures are coming up to clear the QIP pipeline.

Finally, as I have been maintaining on your programme that the government disinvestment is inevitable you must have seen RECs going through the process and couple of other companies will come up for disinvestment in the next six months of this financial year. So there would be a fairly busy pipeline. The flows are coming in and needless to say it is going to help the currency upwards, the currency is likely to appreciate in the short-term because lot of liquidity is coming in.

JV with M&M, Bajaj Auto on track, says Renault India Head

Marc Nassif, Head, Renault India, has clarified that its joint venture with M&M is on track, reports CNBC-TV18's Swati Khandelwal Jain. He says Renault is looking forward to future products from the partnership with M&M.

This is the first interview ever since he took over the reigns of Renault India. Nassif spoke exclusively to us about how he was surprised with the speculative reports that the M&M-Renault JV is facing some trouble.

He has clarified that there is no breach between M&M and Renault JV. On product strategy, they said they have to slowdown because there is an overall slowdown in the economy. When they launched in the first year itself, they sold about 2,000 cars a month, but now they have come down to about 400-600 units only. To that, he said he is still optimistic about Indian market and that they will revive it back,. They are already working on a facelift version of Logan and that should be out sometime soon.

He also gave an example of how they entered Brazil and it took about ten years for them to come up in that market and then they emerged as winners. Now, they see the same future for the Indian market. They said that tying up with M&M is a very positive thing that has come in. On the MoU, they say it is very much on track and both parties are discussing how to take it forward.

Talking about the Renault-Bajaj JV, he clarified that it is also on track and there has been a lot of speculation about whether Bajaj is planning to pull out or there could be some problem there. He clarified once again that both parties are discussing some issues and things are on track for both JVs.

Indian-origin shares Nobel Prize for Chemistry

London: Indian-origin Scientist Venkatraman Ramakrishnan shares the Nobel Prize in Chemistry this year with Thomas A. Steitz and Ada E. Yonath, it was announced in Stockholm Wednesday.

The Royal Swedish Academy of Sciences said that the Nobel Prize in Chemistry for 2009 awards studies of one of life's core processes: the ribosome's translation of DNA information into life. Ribosomes produce proteins, which in turn control the chemistry in all living organisms. As ribosomes are crucial to life, they are also a major target for new antibiotics, it said in a statement.

Born in 1952 in Chidambaram, Tamil Nadu, Ramakrishnan did his B.Sc. in Physics (1971) from Baroda University in Gujarat and later migrated to the U.S. to continue his studies where he later got settled and attained U.S. citizenship. He earned his Ph.D in Physics from Ohio University in the U.S. and later worked as a graduate student at the University of California from 1976-78. Ramakrishnan, now a Senior Scientist at the MRC Laboratory of Molecular Biology in Cambridge has authored several important papers in academic journals.

Ramakrishnan and Steitz are U.S. citizens while Yonath is from Israel. Ramakrishnan joins an illustrious list of Indians and people of Indian origin, who have won the Nobel Prize in various disciplines - including Rabindranath Tagore, C.V. Raman, Hargobind Khorana, Mother Teresa, S. Chandrashekhar and Amartya Sen.

Ramakrishnan, Steitz and Yonath have been awarded for showing what the ribosome looks like and how it functions at the atomic level. All three have used a method called X-ray crystallography to map the position for each and every one of the hundreds of thousands of atoms that make up the ribosome.

"Inside every cell in all organisms, there are DNA molecules. They contain the blueprints for how a human being, a plant or a bacterium, looks and functions. But the DNA molecule is passive. If there was nothing else, there would be no life," a statement from the academy of sciences said.

The blueprints become transformed into living matter through the work of ribosomes.

An understanding of the ribosome's innermost workings is important for a scientific understanding of life. This knowledge can be put to a practical and immediate use; many of today's antibiotics cure various diseases by blocking the function of bacterial ribosomes. Without functional ribosomes, bacteria cannot survive. This is why ribosomes are such an important target for new antibiotics, the statement added.

This year's three Laureates have all generated 3D models that show how different antibiotics bind to the ribosome. These models are now used by scientists in order to develop new antibiotics, directly assisting the saving of lives and decreasing humanity's suffering.

Google's PowerMeter to boost energy efficiency

Los Angeles: Google is partnering with privately held firm Energy, to provide households with free energy management software called PowerMeter, which will boost energy efficiency, the company said on its blog.

Google had launched PowerMeter, which is a web tool, in February to let consumers monitor how much electricity they use at home. But in order to use PowerMeter consumers needed a smart meter installed. Many customers have already tested and used this application. Now, consumers can buy Energy's power-usage measuring device called TED 5000 which costs around $200, and use Google's software on top of it, without ever needing a smart meter.

Even though many companies are now trying to propagate smart meters they still account for a small percentage of all U.S. electricity meters. Technology giants like Google and IBM are shifting into the world of building a smart grid, envisioning a more efficient electricity grid that uses more renewable energy and powers up 'smart' appliances.

Google's partnership with Energy does not include any financial terms. Google is already working with Sempra Energy's San Diego Gas and Electric and Germany's Yello Strom. Google is also trying to develop clean technology. Some of its projects include ways to write software to connect plug-in hybrid vehicles to the power grid and a mirror technology that could reduce the cost of building solar thermal plants by more than a quarter.

EROS international plans IPO….

AIM-listed integrated studio operator Eros International plc is planning to list its wholly-owned Indian subsidiary on the Bombay Stock Exchange in the current financial year.

Eros International plc, has firmed up its plans to list Eros International Media Ltd, its wholly-owned subsidiary company in India, on the BSE, the company said in a regulatory filing to the London Stock Exchange.

“It is expected that the transaction would conclude within the current financial year ended March 2010,” the filing added.

Enam, Kotak and RBS (Royal Bank of Scotland) has been appointed to act on the Indian IPO.

“It is currently intended that any new funds raised by Eros India in the Indian IPO will not result in a dilution of the company’s ownership in excess of 25 per cent.

The company has also made a few changes in its management and has appointed A P Parigi as group CEO for the Indian operations and Naresh Chandra as the non-executive Chairman of the Indian board.

“It is expected that the intended IPO and the recent appointments, would drive the group’s growth and consolidation within India.

Eros International plc has experienced a strong second quarter of the financial year and continues to trade in line with management’s expectations.

The cash generation during the July to September period was in line with expectations and net debt on September 30 2009 was at a similar level to that of March 31 2009.

“Given the strong release schedule and anticipated cash generation in the second half, net debt is expected to show a material reduction by the financial year-end.

Indiabulls Relaty IPO opens on 12th October

The initial public offering (IPO) of Indiabulls Power, a subsidiary of Indiabulls Realty will open for subscription on October 12, 2009 and will close on October 15, 2009.

The company is expected to raise around Rs 2,000 crore.

The proceeds of the issue will be used to part finance the construction and development of the 1,320 MW Amravati Power Project Phase – I (Rs 775 crore from the issue) and for funding equity contribution in the company’s wholly owned subsidiary, IRL, to part finance the construction and development of the 1,335 MW Nashik Power Project (Rs 660 crore from the issue).

Indiabulls Power will offer 33.98 crore equity shares via this IPO. There will also be a green shoe option of up to 50,900,000 equity shares, which will take the issue size to 39.07 crore shares. Before the green shoe option, the issue will constitute 16.98% of the fully diluted post issue paid-up capital of the company and post the green shoe option - 19.06%.

Vodafone to get I-T notice on Hutch deal

Telecom major Vodafone’s tax woes are set to increase immensely after Diwali by when the income tax department is planning to send it a showcause notice on its $11.2-billion acquisition of Hutchison’s 52% stake in Hutch-Essar in 2007. The notice, expected to be under Section 163 of the Income Tax Act, would merely establish the Indian tax authorities’ jurisdiction over the transaction.

“It’s not an upfront demand for tax under Section 201. The showcause notice (SCN) will simply ask Vodafone why it should not be taxed for capital gains in India under Section 163 of the IT Act,” a source close to the development said.

Section 163 of the Act defines who all may be considered as agents of non-residents for the purpose of tax in India. Contending that the erstwhile Hutchison-Essar was an “agent” of non-resident Hutchison Inter-national; the income tax department has claimed that the Vodafone-Essar deal involved Indian operations and so is liable to be taxed in the country.


The SCN will then pave way for the department to send a formal demand notice of nearly $2 billion to the telecom giant. While the capital gains tax liability is estimated at $1.7 billion, if the department finds Vodafone in default of tax payments, it would also be liable to pay a penalty and an 18% annual interest.

While tax authorities have been pursuing the deal since 2007, it was only in January this year that the Supreme Court dismissed Vodafone’s special leave petition challenging a showcause notice issued by the income-tax department. This, in effect, allowed the tax department to go through the transaction details of the acquisition, something that Vodafone had steadfastly refused to do till then.The department had initially sent notices under Section 163 and 201 of the IT Act to the company. But Vodafone questioned the income-tax department’s jurisdiction over the deal on the grounds that it was carried out between two overseas companies. The stake was transferred directly from Hutchison International and routed through CGP Investment (Holdings), which is incorporated in the Cayman Islands, to Vodafone.

Tax experts say it could take up to four years before Vodafone actually has to fork out the money as it would once again go through the entire judicial process against the demand notice.

Drought not to impact India's growth

With the worst monsoons since 1972 plaguing India, the country's GDP growth has been pegged by many economists to be below 6%. However, the Indian government and the RBI have been more optimistic as they are of the opinion that India will be able to log in a growth of 6% plus for FY10. What is more, the Deputy Chairman of the Planning Commission Mr. Montek Singh Ahluwalia believes that the drought would not pull down India's GDP growth below the government target of 6.3% and the overall impact would not be as bad as expected earlier. He further added that inflation would ease in the coming months as the rise in food prices was largely due to an increase in speculative activities. This is because the weak monsoons sparked fears that food prices will soar.

Thus, Montek Singh appears confident that prices will stabilize and is hopeful that inflation will not exceed the 5% mark by the end of FY10 as envisaged by the RBI. Incidentally, food prices have soared by 14.8% since the start of the current fiscal. The RBI will be more than happy if inflation does not rise as it will then be able to focus on b0lstering India's GDP growth. Therefore, it will be interesting to see whether Montek Singh's predictions actually materialize. The central bank for one will be keeping its fingers crossed!

P/E

Today's chart of the day shows a comparison of the P/E of select BSE indices as these stand today compared to what they were a year ago. And the contrast is stark. While P/E of all these indices were at their lows on October 2008 for obvious reasons (we were at the peak of fear of a global recession and credit crisis), the way these have moved up over the last few months draws much concern..

Note: CG-Capital goods, HC-Healthcare, O&G-Oil & Gas
Data Source: CMIE Prowess
Proponents of a bull run are all making the case of a much improved corporate performance in the September quarter. But this seems a bit farfetched. The earnings outlook is far from rosy. While June quarter performance was driven by operational leverage in the form lower raw material and interest cost, we do not see this sustaining going forward.

Ultimately companies have to grow sales to grow their profits, which seems tougher to achieve in the current environment, at least if we are to go by our recent interactions with companies across sectors.

Failure of a realty IPO can hurt broader markets

If you believe that neither the tantrums of the weather gods nor muted corporate earnings reports nor strained economic variables can topple the meteoric rise in the Sensex, this argument could change your views. "Real estate could be the lynchpin for the equity markets and a failure of a large initial public offering could start a correction in the market." These are not our views but of a person who is one of the most revered voices in real estate and heads the largest mortgage financing company in India. Yes we just quoted the words of HDFC Chairman Mr. Deepak Parekh. Reason enough for investors to acknowledge that his assessment of the real estate market cannot be further from truth.

Cut back to late 2007/early 2008 and one can recall large real estate players seeking billions of rupees from the IPO markets on the basis of the valuation of their 'land banks'. Ignorant investors were cajoled into subscribing to these issues on the hopes of supernormal listing gains. Many investors fell into the trap without a careful analysis of their leveraged balance sheets. However, by late 2008, most of these real estate players were struggling to carry the weight of their debt and all the euphoria around their land banks had fizzled out. But as they say - Old habits die hard!

Real estate companies are back at it again seeking billions from the IPO markets, hoping that investors have a short memory. Thanks to veterans like Mr. Parekh, you can get to see the 'real' picture!

Reliance Mutual Fund

A Fine Dining experience for Visa Cardholders

The RBI should start worrying about inflation

After staying in the negative zone for quite a while, inflation has rebounded and how! The wholesale price index for the week-ended September 19 stands at 0.83%. The headline number for week-ended August 1 stood at -1.74%—a 257 basis point (2.57%) rise in seven weeks does not bode well for the country.

In an interview to CNBC-TV18, HDFC Bank’s Chief Economist Abheek Baruah said it was time for the Reserve Bank of India (RBI) to start worrying about inflation. Baruah expects inflation to reach 5.6% by December and 7.7% by March.

Baruah said the RBI could make some kind of measure to rein in excess liquidity, “since India was coming out of the low growth phase.”

Stimulus pkg won't help large coffee cos: Tata Coffee

The Commerce Minister Anand Sharma, in his statement, said there was a strong relief package for coffee growers in the offing thus helping the sector tide over its crisis. The coffee industry has made proposals worth Rs 550 crore. Commenting on the issue MH Ashraff, MD, Tata Coffee said the package would come as no relief to his company as this would only help small corporates. However, he said that Tata Coffee margins were not affected by the downfall in crop, in fact he sees an improvement in margins in the second half of the financial year.

Buy IDBI Bank, target of Rs 160: RR Financial Consultants

RR Financial Consultants has recommended a buy rating on IDBI Bank with a price target of Rs 160, in its report dated October 1, 2009. The share closed at Rs 125.00, down Rs 2.2, or 1.73%.

"As per other technical indicators, IDBI Bank is trading well above the crossover of 9 & 18 days WMA and 50 days SMA. This indicates the counter is bullish in medium to long term. 14 Days RSI is trading at Rs 73 level, with upward bias. But according to this the counter is already in over bought zone; therefore we may see some correction in prices in the near term. Overall the trend remains positive for the counter. So any dip in price levels from here will be taken as an opportunity to make fresh long position. It is taking strong support at Rs 105 level. Next target is placed at Rs 160," says RR Financial Consultants' report.

SBI has target of Rs 2400: Sukhani

SBI has target of Rs 2400, says Technical Analyst, Sudarshan Sukhani.

Sukhani told CNBC-TV18, "My top picks are primarily midcap PSU banks, that is Bank of India, Bank of Baroda and UCO Bank but that is just a matter of choice. The entire banking universe broadly suggests that outperformance in the times to come, so if you own SBI with you, you really don’t want to get out in a hurry, look for a target of somewhere around Rs 2,400. But you must keep a protective stop that would be somewhere at Rs 2,100 and if the markets and the stocks start slipping below that then you get out and otherwise wait patiently for your targets to come and that applies generally to most other banks.”

Transparency in Trade Details

Next time you put your trade orders to buy equity or derivative contracts or certificate of deposits with your broker on the National Stock Exchange Ltd. (NSE) terminal; you can get confirmation of the same from the trade verification window available on www.nseindia.com/tv . The data on trade would be available from the next day of your trade date (T+1).

This will help you in the following ways:

• Receive transaction statements daily
• Confirmation or Verification of trade will be faster with the trade details provided by your broker
• Enhance investment tracking and management of your portfolio
• Infuse transparency
• Build confidence

This initiative by the NSE Investor Protection Fund Trust will go miles to instill transparency and investor’s confidence. Good move in the interest of investors!

There is no such thing as a free gift!

If you are receiving gifts from your friends, there is a price tag attached – not from your friend but from the taxman!

From October 1, 2009, gifts received from non-relatives will be included in the taxable income of individuals and will be taxed at the normal tax bracket. Earlier, only cash gifts over Rs 50,000 were taxed as income in the hands of the recipient individual or HUF.

As per the amendment to provisions of Section 56(2) (vii) introduced by the Finance Act, 2009, the under-mentioned items will also be included in the income of the individual assessees and HUFs if they are received as a gift by them. The same will be brought to tax if the aggregate value of all gifts exceeds Rs. 50,000 in any previous year:

• Land and building
• Shares and securities
• Jewellery
• Archaeological collections
• Drawings
• Paintings
• Sculptures
• Any work of art

Additionally, if you are thrilled at negotiating a deal below the Fair Market Value (FMV), watch out for the tax axe from the Income-tax Assessing Officer (AO). If the purchase consideration is inadequate i.e. substantially lower than the FMV, then it will attract tax. The AO would take the FMV of such a purchase or the differential value of such a purchase, if it exceeds Rs 50,000.

However, provision for taxability of gifts shall NOT apply to any sum of money or any property received

• from any relatives or
• on the occasion of marriage or
• under a will or by way of inheritance

The term ‘relative’ will mean as defined under section 56 of the Income-tax Act, 1961 and not as understood under common parlance.

Further, if you receive any other valuables such as a motor car, electronics, furniture, etc. you will be saved from being taxed and you can continue to enjoy the luxury of receiving any of these gifts even beyond October, 2009.

We believe that such a fiscal measure by the government will bring in more assessees under the tax bracket. However, it would have been more appropriate if the government had a separate exemption limit for each category of asset in the list. For example, incase of land and building, the exemption limit of Rs 50,000 is meaningless; instead it could have been enhanced to say Rs 10 lakh.

Diwali comes early – for the person buying a house!

To brighten up the festive season, some banks have introduced attractive offers on their home and auto loans.

· State Bank of India is offering:

• Home loans of up to Rs 50 lakh at fixed interest rates of 8% p.a. for the 1^st year and 8.5% p.a. for the next 2 years

· IDBI is offering the following from the period October 1 to December 31, 2009:

• Auto loans at 8.5% p.a. (as compared to 12% p.a. previously)
• Home loans less than Rs 30 lakh at reduced floating rate of 8.75% p.a. (from 9% p.a.)
• Home loans between Rs 30 lakh-Rs 50 lakh at reduced floating rate of 9% p.a. (from 9.5% p.a.)
• Home loans above Rs 50 lakh at attractive floating rate of 9.25% p.a. (down from 9.5% p.a.)

· Bank of Rajasthan has slashed home loan rates in an offer valid till December 31, 2009:

• Fixed rate is reduced to 9% p.a. for the 1^st year, and 10% p.a. for the 2^nd and 3^rd year
• Floating rate is cut to 8% p.a. for the 1^st year and 9% p.a. for the 2^nd and 3^rd year

· Punjab National Bank is offering:

• Home loans upto Rs 30 lakh at 8.5% p.a. fixed rate, with a reset clause of 3 years. This offer is valid only till October 31, 2009

· Bank of India, under its Festival Offer valid till October 20, 2009 is offering:

• Home loans upto Rs 10 lakh at 8.5% p.a. for a repayment period of 3 years

Hurry, and make the most of these offers, while they last! However, ensure that you read all the fine print of these offers before subscribing to them.

Buying this hated asset could be the best trade in the market today

Despite continued discussions about fundamental USD weakness, and the fine job the government is doing devaluating our currency, I can't help seeing reasons to buy the USD.

My view does not rely on contradicting the thinking according to which excess liquidity and unbalanced budgets for the government and the consumer lead to weaker currency. But I think that the amount of currency being "retired" with debt not being rolled and the velocity being null is partly countering the excessive printing.

Also, one need also to keep in mind that when it comes to currencies all is relative, and while the Fed and the Treasury department are certainly not acting with a strong USD in mind these days, other countries have embarked on a similar path.

Last but certainly not least, almost everybody is short USD.

TAX HORROR: White House committee to propose national sales tax

From Zero Hedge:

The “Center for American Progress” is the best example of an oxymoronish name that I can think of. This is a “progressive” (socialist) “think tank” (another misleading term) lead by John Podesta, a former Clinton Chief of Staff and Obama adviser.

They are coming out with a report on Wednesday that will recommend that:

[T]he administration should consider a tax on consumption, such as a value-added tax [VAT] system similar to that in use in the European Union

Derivatives not the root of financial crisis: Satyajit Das

Last weekend the G20 among other things promised to rein in reckless banking. Reckless banking in the years before Lehman was largely made possible because of complex derivatives that allowed traders to hide risks, maximise their upfront profits and fool customers, shareholders and even regulators.

The question today is can derivatives traders be tamed and can derivatives be made serve their prime purpose of hedging? Answering these questions exclusively on CNBC-TV18, Satyajit Das, the famous author of the book Traders, Guns and Money—the knowns and unknowns of the dazzling world of derivatives, says derivatives did help the economy go into a financial crisis, but it is a little simplistic to say derivatives are the cause of it. “They definitely made it worse because they allowed risk to hide in places and risk became fragmented and also they assisted in creating leverage and complexity in the system and that complicated the crisis and it is also complicated how we are going to have to deal with it.”

Traders, Guns and Money—the knowns and unknowns of the dazzling world of derivatives is a minor classic. Former RBI Governor Dr YV Reddy had distributed this book to members of the RBI board in 2006, when he wanted to warn them of the emerging crisis in the financial world.

Here is a verbatim transcript of the exclusive interview with Satyajit Das who is currently a risk consultant and has spent nearly 25 years trading derivatives, on CNBC-TV18. Also watch the accompanying video.

Q: First let me begin with your book. In Traders, Guns and Money you begin with a derivative product sold to an Indonesian company, where the company has to pay more if rates rise and if interest rates fall, they don't get lower rates but they have to pay fixed rates and the principal doubles. It is a product which a fool will know is heads you lose and tails also you lose. How close is this example to reality? Are such products actually sold or were you caricaturing?

A: It is actually based on real transactions I saw but I cannot tell you the details because I would have to kill you because if the liable laws. But interestingly enough the transaction that is outlined actually has a parallel in real life at the moment because as you may be aware the municipalities in Italy have entered into some transactions which bear a striking a resemblance. So perhaps somebody copied them from the book.

Q: How much would you say that derivatives were the root of the financial crisis?

A: I think derivatives helped but it is a little simplistic to say derivatives are the cause of the problem. They definitely made it worse because they allowed risk to hide in places and risk became fragmented and also they assisted in creating leverage and complexity in the system and that complicated the crisis and it is also complicated how we are going to have to deal with it.

Q: The Financial Stability Board (FSB) and the BIS have put forth some plans to tame derivatives—like Central Counterparty Clearing (CCC). Will it work at all?

A: I think one has to come back a little bit from what the issues are to look at where the central counterparty fits in. What has actually happened is that after the AIG episode and the Lehman’s episode, the issue of counterparty risk—this is the risk that one bank has on another—became very central to the concerns of regulators because I always took about daisy chains of risks—somebody deals with somebody, somebody deals with somebody and if anybody in that chain breaks down then you have a systemic crisis and I think the central counterparty goes to the heart of the problem. Now the first comment I would make about that is it’s not new. It has been around for a quarter of century but it is not in my view the complete answer for a whole bunch of reasons. The first reason is the idea of putting these on an exchange takes the idea of two big to fail to an entirely new level because as I have said some divine power ought to be supporting this because fundamentally if this counterparty every has a problem then you have got a huge, huge issue. And there are also mechanics of how you do it which I don’t think the FSB and central banks under stand fully and haven’t thought through.