finxpress_19august2012

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AUGUST 19 ,2012

Company In Focus

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Company in

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Term of t

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Mark

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News of t

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Cover Sto

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Fun Corner

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Term of the Week

INSTITUTE OF MANAGEMENT TECHNOLOGY, GHAZIABAD

Cover Story : Maruti Shutdown in Numbers

AUGUST 19 ,2012

EDITORIAL

Dear Readers, Greetings from FinNiche! With multiple ice breaking events being carried out in IMT premises for the 1st year students, the various committees and clubs are thus helping these students to identify their potentials and strive hard to build over it. The evenings in IMT are now busy as while on one hand students who are organizing the events are strategizing the events on other hand students who are participating are strategizing how to win those events. Team FinNiche thereby give its best wishes to all the students of IMT Ghaziabad for the upcoming events. In this edition of FinXpress we have Reliance Capital Limited in the “Company in Focus” section describing how this company has emerged as one of the leading financial services company in private sector. In the “Term of the Week” from terms related to Shares we move to Exchange Traded Funds. In the markets section, we bring you how stock indices showed positive trend as a surprise drop in inflation for July raised hopes of a possible rate cut at next month’s RBI policy meeting. Data on indirect tax receipts and SEBI’s measures to boost the capital markets also had a positive rub-off on the markets. In the “special page” we will cover Maruti Shutdown in Numbers. We sincerely hope that the readers find our content engaging. We would appreciate feedback and suggestions for improvement. We hope to bring you more information in the future thus keeping you updated and adding to your knowledge base. Till then, “Enjoy Reading”! Yours Sincerely, The Editorial Board “FinXpress”

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AUGUST 19 ,2012

COMPANY IN FOCUS

Reliance Capital Limited

Reliance Capital Limited is one of India's leading and amongst most valuable financial services companies in the private sector. It is headed by Anil Ambani and is a part of the Reliance ADA Group. It ranks among the top 3 private sector financial services and banking companies in India, in terms of net worth.

Reliance Capital Limited (RCL) was incorporated in year 1986 at Ahmadabad in Gujarat as Reliance Capital & Finance Trust Limited. RCL entered the Capital Market with a maiden public issue in 1990 and in subsequent years further tapped the capital market through rights issue and public issues. The name RCL came into effect from January 5, 1995. In 2006, Reliance Capital Ventures Limited merged with RCL and with this merger the shareholder base of RCL rose from 0.15 million shareholders to 1.3 million.

Structure of Reliance Capital Limited

Reliance Capital is divided into the following financial business units

Reliance Mutual Fund is amongst top two Mutual Funds in India with nearly seven million investor portfolios. Reliance Life Insurance and Reliance General Insurance are amongst the leading private sector insurers in India. Reliance Securities is one of India’s leading retail broking houses. Reliance Money is one of India’s leading distributors of financial products and services.

Financial Highlights of Reliance Capital Limited as On 30th June 2012

Total income of `16.8 billion (US$ 309.1 million) against `14.9 billion in the corresponding previous period an increase of 12%, driven by increase in top line of Commercial Finance and General Insurance businesses

Net profit of Rs.451.4 million (US$ 8.4 million) against `348.3 million in the corresponding previous period a growth of 30%

Net debt to equity improved by 35% to 1.64 as compared to 2.55 at the end of Q1 FY12

The company had total assets of `375.6 billion (US$ 6.7 billion) - increase of 15%. The company had a net worth of `117.5 billion (US$ 2.1 billion).

This resulted in net debt to equity ratio of 1.64, as against 2.55 as on June 30, 2011 – an improvement of 35%.

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Asset Management Mutual Fund, Offshore Fund, Pension fund, Portfolio Management

Insurance Life Insurance, General Insurance

Commercial Finance Mortgages, Loans against Property , SME Loans, Loans for Vehicles, Loans for Construction Equipment, Business Loans, Infrastructure financing

Broking and Distribution Equities, Commodities and Derivatives, Wealth Management Services, Portfolio Management Services, Investment Banking, Foreign Exchange, Third Party Products

Other Businesses Exchanges, Private Equity, Institutional Broking, Asset Reconstruction, Venture Capital

AUGUST 19 ,2012

Future Growth Plans for the Next Three to Five Years:

Increase the customer base - from 20 million to 50 million

Increase the distribution reach - from 5 thousand to 25 thousand cities and towns

Increase the number of business partners - from half a million to one million

Globalize operations by leveraging our domestic experience and capabilities to expand our asset management and wealth management businesses in emerging markets across the world

Together, these initiatives will further accelerate the company’s growth and lead to substantial value creation for all.

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AUGUST 19 ,2012

TERM OF THE WEEK : Exchange Traded Funds

Exchange Traded Funds (ETFs) have been in existence in India for quite some time now. Apart from Benchmark AMC, which specializes in ETFs, there have been a couple of ETFs from Prudential ICICI AMC and UTI AMC. But so far ETFs have not enjoyed the kind of popularity that the conventional Mutual Funds enjoy. ETF is a security that tracks an index, a commodity or a basket of assets like an index

fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does.

By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order.

Difference between Conventional Mutual funds and ETFs?

In a normal fund we buy/sell units directly from/to the AMC. First the money is collected from the investors to form the corpus. The fund manager then uses this corpus to build and manage the appropriate portfolio. When you want to redeem your units, a part of the portfolio is sold and you get paid for your units. The units in a conventional MF are, therefore, called in-cash units. But in ETF, we have something called the authorized participants (appointed by the AMC). They will first deposit all the shares that comprise the index (or the gold in case of Gold ETF) with the AMC and receive what is called the creation units from the AMC. Since these units are created by depositing underlying shares/gold, they are called in-kind units. These creation units are a large block, which are then split into small units and accordingly bought/sold in the open market on the stock exchange by these authorized participants. Therefore, technically every buy and sell need not change the corpus of an ETF unlike a conventional MF.

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AUGUST 19 ,2012

MARKET THIS WEEK

Sensex gained 0.725% from last week and ended the week at 17,689.51.

Simple Moving Averages

Returns – BSE Sensex

Nifty gained 0.97% from last week and ended the week at 5367.15

Simple Moving Averages

Returns – Nifty

30 Days 50 Days 150 Days 200 Days

17297.39 17183.01 17140.57 16900.15

YTD 14.47 % 1 Week 0.80% 1 Month 3.40% 3 Months 10.10 %

6 Months -3.30 % 1 year 5.00 % 2 Year -1.00 % 3 Year 19.70%

30 Days 50 Days 150 Days 200 Days

5,247.66 5,211.7 5,199.82 5,112.63

YTD 16.05 % 1 Week 0.90 % 1 Month 3.30% 3 Months 10.20%

6 Months -3.60 % 1 year 6.10 % 2 Year -0.90 % 3 Year 22.30 %

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AUGUST 19 ,2012

Overview

Indian stock indices have now risen for three successive weeks, fueled by steady FII inflows and amid expectations of some reforms going through. A surprise drop in inflation for July also raised hopes of a possible rate cut at next month’s RBI policy meeting. Data on indirect tax receipts and SEBI’s measures to boost the capital markets also had a positive rub-off on the markets.

However, data on exports and imports continues to be grim, serving as a cruel reminder of challenges emanating from the overseas markets. The release of the controversial CAG reports in the Parliament also re-ignited fears of a wider political backlash.

Technically, the ongoing liquidity-powered uptrend may continue for a while before there is any meaningful pullback. Much will hinge on the way global markets unfold. With the US economy showing resilience, the focus will be on the Eurozone and China. The current global risk-on trade has been fueled by hopes of fresh policy stimulus from both these regions. Any disappointment on that front could lead to a reversal.

Major events this week:

Videocon Industries today purchased 5.5 lakh shares of ship-builder ABG Shipyard for over `20 crore from one of its own group companies through open market transactions. Mumbai-based IT firm Mastek, which has seen a surge in its stock price and volumes in the last few days, has clarified to the stock exchanges that there is no specific development in the company which should amount to such volatility in the share price and traded volumes.

Shares of GMR Infra today fell by over 3 per cent after CAG said the Civil Aviation Ministry violated bid conditions, benefiting GMR-led DIAL by `3,415 crore.

Reliance Power scrip tumbled about 6 per cent today after official auditor CAG said the firm got undue benefit of `29,033 crore when the government allowed the use of surplus coal from blocks alloted to its Sasan power plant for other projects.

Policy Rates Reserve Ratios Lending Deposit Rate

Bank Rate 9% CRR 4.75% Base Rate 10%-10.5%

Repo Rate 8% SLR 23%

Savings Deposit Rate 4%

Reverse Repo Rate 7%

Term Deposit Rate 8%-9.25%

Margin Standing 9%

Exchange Rate v/s INR Commodities unit Rs./unit

% change

Currency Symbol Rate %

change Gold 10 gms. 30168 0.45%

US Dollar $ 55.7 0.75% Silver 1 Kg. 53619 0.25%

Euro € 68.8

5 0.89% Crude Oil 1 BBL 5378 4.6%

Dirham AED 15.1

7 0.73%

Japanese Yen ¥ 0.70 0.25%

Chinese Yuan CNY 8.76 0.22%

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AUGUST 19 ,2012

NEWS OF THE WEEK

TATAS, JINDALS, ADANIS & ADAG NAMED BENEFICIARIES

India Inc Hauled Over Coals as Govt Prepares Counter-Attack

The national auditor has rattled India Inc and the government with scathing reports naming top business houses such as the Tatas and Jindals and the Anil Ambani Group among alleged recipients of state generosity, including free coal mines, that resulted in benefits that could add up to a mind-boggling `3.8 lakh crore. The government, nervous about the fact that some blocks were given away when Prime Minister Manmohan Singh held the coal portfolio, responded aggressively and sought to rubbish the calculations of the Comptroller and Auditor General(CAG).BJP demanded Singh’s resignation saying he was morally responsible for the alleged scams, the magnitude of which was almost double the supposed loss to the exchequer as a result of the telecom scam.

CAG said the government’s move to allocate coal blocks free to the Tatas, Jindals, Essar, and many other companies resulted in gains of an estimated `1.86 lakh crore, based on the price of the entire quantity of coal that can be mined from these blocks over their lifetime. It said the blocks could have been auctioned six years ago, and the delay has caused a loss to the exchequer.

GOVT, REGULATOR STEP IN FOR MARKETS, INVESTORS

Sebi moves to revive MFs, boost retail play in IPOs. Capital market regulator Sebi has taken the first step to revive the fortunes of mutual fund houses, tweaked rules to step up retail participation in IPOs, and made it easier for companies to raise funds and for promoters to dilute stake.

Also, investors will soon be able to apply for shares offered in a public issue online through their stock broker. Electronic issuance of initial public offerings, or e-IPOs as the name suggests, can be done online to save time and reduce the paperwork involved. But investing in MFs could become a little more expensive for those in metros and top cities while retail investors could receive more shares in IPOs. Sebi, in its board meeting on Thursday, devised an incentive formula wherein existing mutual fund investors and those residing in top cities would subsidize new investors from smaller cities and towns. The regulator has allowed cash transactions in mutual fund schemes to the extent of `20,000 to make investing easier for small investors in rural areas.

The minimum application size for all investors in public issues has been raised to 10,000-15,000 from 5,000-7,000. Also, “the share allotment system in IPOs will be modified to ensure that every retail applicant, irrespective of the application size, gets allotted a minimum bid lot, subject to availability of shares in aggregate”, a Sebi release said.

More St Play for Insurers, Pension Funds as Finmin panel proposes move to deepen stock, corporate bond markets

The finance ministry is considering relaxing investment norms for pension funds and insurance companies to allow them to increase their exposure to equities and corporate debt, as it seeks to channelize domestic savings into the stock market and deepen the corporate bond market.

According to a plan being firmed up by a finance ministry-appointed investment committee on insurance and pension funds, retirement funds would be allowed to invest up to 25% of their corpus in equities, up from the current level of 15%, and the investment cap on corporate debt would be raised to 45% from 40%. The panel has recommended that the exposure of these funds to government debt be reduced from 55% to 40%. Separately, the finance ministry is considering a proposal to allow an insurance company to hold up to 25% stake in a company. The ministry has sought the law ministry’s view as under the current takeover norms, an entity buying 25% stake in a company has to mandatorily make an offer to buy an additional 26% from public shareholders.

At present, Life Insurance Corporation of India and other insurers cannot hold more than a 10% stake in any listed company. The investment guidelines governing life insurers could also be relaxed. The ministry is examining the option of letting life insurance companies invest up to 50% of their debt investments in AA-rated paper. Experts Hail Proposal

Currently, 75% of their debt corpus must be invested in AAA-rated bonds. At present, 50% of the total investible funds of insurance companies have to be parked in government funds. It has now been proposed that this allocation be lowered to 40%.

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AUGUST 19 ,2012

Rupee down 6 paise Vs US dollar at 55.34 in volatile trade

In volatile trade, the rupee today softened by six paise to settle at 55.34 against the US dollar due to demand for the US currency from oil importers.

The rupee commenced higher at 55.25 a dollar at the Interbank Foreign Exchange (Forex) market compared to Friday's close of 55.28. It improved further to day's high of 55.19 on dollar selling by exporters amid sustained capital inflows into the stock market. However, it turned negative in the late morning session on dollar demand from importers amid hesitancy in local shares. Thereafter, rupee touched a low of 55.47 a dollar. FIIs pumped in nearly `340 crore in stocks.

Hindalco Q1 net profit down 34%

Aditya Birla Group flagship firm Hindalco Industries today reported `425 crore in standalone net profit for the April-June quarter, down 34 per cent over the same quarter a year ago, on higher operational expenses. Surge in input costs, mainly in coal, caustic soda and carbon products affected earnings by nearly `200 crore during the reporting quarter."Operational results were impacted due to the planned shutdown of the copper production facility and lower volume due to certain operational disturbances in the aluminium plants.

Inflation falls to 6.87% in July

Inflation in July moderated to 6.87 per cent - lowest since November 2009 - helped by decline in vegetable prices, even as food inflation stayed in double digit and manufactured items remained under price pressure. Inflation, as measured by the Wholesale Price Index (WPI), was 9.36 per cent in July last year. Higher inflation in this category would restrict the scope of RBI to go in for an interest rate cut even as economy is showing signs of slowdown, experts said. RBI Governor D Subbarao had yesterday said that inflation over seven per cent is above the tolerance level and stressed on the need for containing price pressure. Experts, however, said that the dip in inflation was unexpected and that deficient- monsoon and supply constraints would keep the number high in the coming months.

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AUGUST 05 ,2012 PAGE 9 http://www.imtgfinxpress.co.cc AUGUST 19, 2012

COVER STORY

Maruti Suzuki , India's largest car maker, said on Thursday it would restart production at its Manesar factory on August 21. The 550,000 vehicles-a-year factory in Manesar in north India, where the unit of Japan's Suzuki Motor Corp makes its best-selling Swift hatchback, has been idle since the deadly July 18 clash between workers and management.

500 Workers to be sacked due to involvement in violent activities.

Armed police officers deployed at plant to maintain normalcy.

Million USD lost in production last year due to labor unrest.

33 days of production loss due to the shutdown (18 Jul-21 Aug).

300 number of workers commencing production from August 21st.

150 cars/day initial capacity, to be increased to 300 in two weeks.

256 million USD revenue loss, according to Reuters calculation.

154 workers arrested so far due to direct indulgence in violence.

6 billion yen approximate operating profit loss to parent company.

4.4 percent loss in market capitalization since the shutdown.

100 people injured, in addition to the death of a senior executive.

Source: business-standard.com, TOI

Maruti shutdown in numbers

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AUGUST 19 ,2012 PAGE 10 http://www.imtgfinxpress.co.cc

CAN YOU SOLVE IT? Set A Match the following:

Set B

1. Which laptop maker company's former name was "Legend"? 2. What do you associate the white knight with?

CARTOONS:

**Rush in your entries to : [email protected]

The right entries will get their name featured in the next issue of FinXpress. So hit the quiz fast & get yourself visible among 1000 odd in the campus.

Feel free to write to us at : [email protected]

Drop in your suggestions to the editorial team :

Magazine design/news : [email protected]

Articles/quiz : [email protected]

LAST WEEK’S ANSWERS

SET A

1) WTO Pascal Lamy

2) FICCI Kamal Haasan

3) World Bank Jim Yong Kim

4) IMF Christine Lagarde

5) European Mario Draghi

Central bank SET B

1. Land

2. As notes to the balance sheet

Winner: Rajesh Singh

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