Escorts Mutual Fund

CHENNAI: In the first major investment made by a Chennai-based PE fund, TVS Shriram Growth Fund is set to invest Rs 65 crore in exchange for a nearly 25% stake in book and music retail chain Landmark, a closely held subsidiary of Tata’s listed retail business arm Trent that also operates Westside and Star Bazaar retail chains.

This is the third investment for TVS Shriram — a Rs 600-crore fund sponsored by the TVS and Shriram Group — the first two being in TVS Logistics Services and 9.9 Mediaworks. This is the fund’s first investment in the retail segment. TVS Capital CMD Gopal Srinivasan will join the Landmark board.

For the stake sale by Trent, the book chain has been valued at Rs 260 crore. Trent had first picked up a 76% stake in Landmark in 2005 for Rs 103.6 crore. It bought out the remaining 24% share from promoter Hemu Ramaiah last year for an undisclosed amount. Incidentally, Ms Ramaiah and her husband Jai Subramaniam are advisors to the TVS Capital Funds, which manages the growth fund.

It is also learnt that the fund is set to invest Rs 25-30 crore for a 25-40% stake in Bangalore-based facility management company Dusters Hospitality Services. Once the two latest deals are completed, TVS would have invested close to a fourth of its Rs 600-crore corpus.

Trent informed stock exchanges on Wednesday it has entered into a definitive agreement for the sale of 14, 03, 903 equity shares of Rs 10 each in Landmark to TVS Shriram growth fund for a consideration of around Rs 50 crore. Another Rs 15 crore will come by way of the fund subscribing to 4, 21, 171 equity shares of Rs 10 each in Landmark.

TVS Shriram Growth Fund I is registered with SEBI as a venture capital fund. The fund is managed by TVS Capital Funds and targets investments across consumer consumption and business services sectors, such as retail, health care delivery, education, hospitality, food & agro, FMCG, restaurants, facilities management, institutional catering and security services.

Incidentally, the investment comes after former HUL vice-chairman D Sundaram took over as MD & vice-chairman of TVS Capital in July this year.

Commenting on the investment, Mr Noel N Tata, Managing Director of Trent and Chairman of Landmark, said, "We are excited about the equity investment Landmark, and look forward to partnering with TVS Shriram Growth Fund in our journey to scale up the Landmark’s retail business."

Landmark operates around 25 stores across 9 cities with over 2 lakh square feet of retail space. It clocked grossed revenue of Rs 196 crore for fiscal year ended March 31, 2009 against Rs 179 crore in the previous year.
Gopal Srinivasan, founder and Chairman, TVS Capital funds, said, " Landmark is a marquee Investment and we are excited to enable the next wave of growth at one of the leading speciality retailers in India".
Executive Director, Suresh Raju said with organised book store market of only 10% and growing middle class and changing consumer behaviour across India, there is a huge macro opportunity for Landmark to expand in Metros and non-metro cities.
" We believe, Landmark has built a strong brand over the years and is well positioned to serve consumers with product mix consisting of books, music, gifts, toys, stationary, home, gaming and technology accessories.

NEW DELHI: Assets of the mutual fund industry have touched an all time high of Rs 7.62 lakh crore, while country's largest fund house Reliance MF witnessed a decline of over Rs 1,400 crore in its average assets under management (AUM) at the end of October.

The industry's average AUM grew by Rs 19,391 crore, or 2.61 per cent, in October which analysts believe was mainly on the back of increased inflows in fixed income plans.

The combined average AUM of the 36 fund houses hit the historic Rs 7,62,301.82 crore mark at the end of October, the data by Association of Mutual Funds in India (AMFI) showed.

"Fund houses have witnessed a decline in the assets of their equity portfolio. But inflows into fixed income schemes have helped the industry to record a growth in their assets," Taurus MF Managing Director R K Gupta said.

Reliance MF maintained its position as the country's largest fund house despite a decline of Rs 1,469.51 crore in its AUM during the month. At the end of October, the AUM of Reliance MF stood at Rs 1,16,781.92 crore.

"Reliance MF has increased equity exposure than other portfolios. Since all the investments in equities need to be mark-to-market at the end of the month, the AUM of the fund house suffered a decline during October," Gupta noted.

The assets of the country's second largest fund house HDFC MF inched closer to the Rs 1 lakh crore mark with an addition of Rs 2,888 crore during October.
http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/MF-industry-assets-hit-record-high-of-Rs-762-lk-cr/articleshow/5196403.cms

MUMBAI: Average assets under management (AUM) of domestic mutual funds rose marginally in October from the previous month. Total assets under management in October stood at Rs 7,52,209 crore against Rs 7,43,696 crore in September, according to data on the Association of Mutual Funds of India (AMFI) website.

Most top fund houses registered a growth in assets this month. Fund managers said several fund houses sold off their equity assets as markets touched the year’s high earlier this month.

Many mutual funds are sitting on cash, fund managers said, in anticipation of a correction, they said. In fixed-income schemes, fund officials said there have been significant inflows into ultra short-term schemes.

Among leading fund houses, Reliance Mutual Fund’s AUM in October was at Rs 1,16,781 crore compared with Rs 1,18,251 crore in September. HDFC Mutual Fund’s assets during the month rose to Rs 93,316 crore against Rs 90,427 crore in the previous month.

ICICI Prudential Mutual Fund’a assets in October was almost flat over the previous month at Rs 80,524 crore. Birla SunLife Mutual Fund’s assets in the month rose to Rs 65,052 crore against Rs 63,055 crore last month.

MUMBAI: Rajesh Sinha, a 30-year-old marketing professional had five insurance policies where he was paying a premium of Rs 50,000 against each of of the policies. With such a huge premium outgo, he was under the impression that he was more than adequately insured.

But little did he realise that his actual insurance need was 10 times his annual salary which was over a crore of rupees. Against this each of his unit-linked policies (Ulip) schemes offered protection for only Rs 2.5 lakh i.e. a total cover of Rs 12.5 lakh.

The proliferation of Ulips has taken away the focus from insurance. Buying insurance needs a staggered approach and one has to review/expand the cover as s/he assumes more responsibilities such as marriage, having children or dependent parents.

HOW TO REVIEW YOUR COVER

Today single-income families are making way for more double-income families. But that doesn’t reduce the financial responsibility for either of the spouses.

“The need for insurance emanates from the various obligations that the breadwinner is expected to fulfil such as children’s education, retirement, health and savings. These change with the changing life stages and are driven by the individual’s specific needs. Thus, each individual should put a rupee value to each need and thereafter conduct a self-risk assessment,” Leena Dhankher Joshi, AV-P, life, accident & health profit centre, Tata AIG Life Insurance.

This may sound very complex, but is quite easy. Assume a complete discontinuation of your income and evaluate the implications of that on your family.

This self-assessment coupled with the current life stage and the responsibilities towards the family. For example, children’s education, marriage, retirement plans and various liabilities such as home loans will help you asses your insurance needs. A ball-park figure is 10-15 times your salary, which should be the size of your insurance cover.

INSURE YOUR HOME LOAN

If you have a large home loan, it’s a wise option to cover the liability. A borrower wouldn’t want to pass on the financial burden to his spouse or dependent parents in case of an unexpected demise or even a disability and hence a job loss. Life insurance companies have designed home loan insurance covers in alliance with banks to cover this risk. However, a simple term plan could be a better back up than these home loan insurance cover, financial advisors say.

“Let us assume a borrower has opted for a home loan of Rs 30 lakh. Now, in case of a term cover, an individual of 35 years can opt for a term cover of Rs 30 lakh and pay an annual premium of around Rs 8,000. If an individual would have opted for home loan insurance, he would have had to pay an upfront amount of Rs 1.52 lakh as an insurance cover on the Rs 30 lakh home loan.

Now, this could prove to be loss to a customer if he prepays the loan within 10 years. Secondly, the insurance amount is calculated on a reducing balance basis. So the value of the cover falls with every passing year,” Suresh Sadagopan a certified financial planner, Ladder 7 Financial Services.

http://economictimes.indiatimes.com/personal-finance/insurance/analysis/Demystifying-insurance-policies/articleshow/5197966.cms

Finmin against abolition of insurance commission

The finance ministry is likely to favour the continuation of the commission model for the insurance sector. This would be contrary to the suggestions made by the Swarup Committee on Investor Awareness and Protection in its discussion paper that the commission structure for the insurance sector should be phased out by April 2011 in favour of a fee-based system.

A finance ministry official said that implementing the recommendations is not likely as financial literacy in India is low and it is too early to move away from commission model to an advisory model. “There is lack of financial awareness in the country even among the educated population, leave aside the rural and uneducated population. Till our society becomes more financially aware, till the point we start asking for services, it is not possible to implement this move. In smaller towns, agents have helped with insurance penetration,” the official said.

Insurers have helped the government in working towards financial inclusion. “While mutual funds have mostly spread to the metros, insurers have spread to the remote areas through services of agents. There have been cases of misselling but one cannot ignore the role of agents so far," said the official. “Most of the insurance products in India are transparent and they spell out various charges deducted and benefits offered in the policy document,” he added.

J Hari Narayan, chairman, Insurance Regulatory and Development Authority (Irda), had earlier gone on record against the proposal to phase out the commission structure. He said it was a premature step given the width and the depth of the Indian market where there is a need to nurture a much closer relationship between the policyholder and agent.

The Swarup committee recommendation would impact all 3 million insurance agents who serve 188 million investors. D Swarup is also the chairman of the Pension Fund Regulatory and Development Authority.

The Swarup committee recommended upfront commissions embedded in the premium paid be reduced to no more than 15 per cent of the premium immediately. In 2010, this should be brought down to 7 per cent and a zero-commission structure should be in place by April 2011. The interim period should be used by insurance companies to help their agents make the transition to a more mature way of selling and advising, the committee report said. The committee recommended that the sales process should be documented and customer profiling will be mandatory before an adviser sells a product.

http://www.mydigitalfc.com/insurance/finmin-against-abolition-insurance-commission-715

Life insurance companies have managed to pare their losses during the first half of the current financial year, partly due to a decline in the sale of new policies.
What also helped the likes of SBI Life report a profit for the six months to September was an appreciation in the value of its investments, especially shares held. In addition, insurance companies have managed to lower expenses by reorganising their branches, raising productivity levels and putting curbs on expansion into newer markets.
The drop in sales has partly contributed to the reduction in losses since insurers have to set aside extra capital for underwriting new business to meet solvency requirements prescribed by the regulator. The solvency margin is 150 per cent for the life insurance products. So, for a policy worth Rs 100, an insurer has to set aside Rs 150.
Last year, the Insurance Regulatory and Development Authority has reduced solvency margins for many products including unit-linked insurance plans, which accounts for 80 per cent of the sales. As a result, there was a decline in capital requirement.
During the first six months of the current financial year, private sector players have seen a 14.67 per cent decline in premium collected through the sale of new policies.
Insurance companies, which are unlisted, do not disclose quarterly numbers.
Riding on bancassurance and profit from investments, the country’s largest private sector insurer SBI Life reported a net profit of Rs 114 crore during April-September 2009 as against a loss of Rs 46 crore in the corresponding period last year. Profit from investment was estimated at Rs 75 crore as against a loss of Rs 130 crore in April-September 2008.
“We have been able to report a profit because of our low cost of operation and partly due to a profit on investment. We will grow our overall business by 30 per cent. We have managed to control our expense ratio at 16 per cent against 15.73 per cent last year,” said SBI Life managing director and chief executive officer M N Rao.
ICICI Prudential Life Insurance saw its first premium income decline by 38 per cent during the first six months of the financial year to Rs 2,128 crore.
Reliance Life, which is preparing for an initial public offer, brought down its losses from around Rs 517.9 crore in the first six months of the last financial year to Rs 111.7 crore during April-September 2009.
Better expense management has pushed up the net profit for Bajaj Allianz to Rs 125 crore from a loss of Rs 24 crore in the corresponding period last year. Its business fell by 29 per cent during the first half. “Our expense ratio has come down from 20.5 per cent to 18.6 per cent. Lesser new business helped us in the first half,” said Bajaj Allianz Life Insurance chief financial officer Rajesh Vishwanathan.
Higher renewal premium brought down the losses of Birla Sun Life Insurance from Rs 347 crore in April-September 2008 to Rs 238 crore in the first six months of this financial year.
“Our losses are in line with the new initiatives we have taken. We have increased our focus on renewal premium, improving productivity and expense management,” said Birla Sun Life Insurance chief financial officer Mayank Bathwal.
The renewal premium for the insurers grew by 53 per cent during the first six months.
http://www.business-standard.com/india/news/life-insurers-reduce-losses-in-first-half/375336/

MUMBAI: India’s largest bank — State Bank of India, which launched a special home loan scheme in February this year to woo home buyers by offering the lowest rates in the industry will soon decide on whether to extend the scheme beyond November 7, when it is set to expire.

As part of the scheme, which received a good response, the bank offered a fixed rate of 8% for loans up to Rs 5 lakh for five years, while loans up to Rs 50 lakh were priced at 8% for the first year, 8.5% for the second and the third year and in subsequent years it would be linked to the prime lending rate.

SBI chief general manager in charge of retail loans P Nanda Kumaran told ET: “The bank has not taken any decision as yet on extending the deadline.” He said that the decision will be based on the view that SBI’s asset-liability committee (ALCO) takes on interest rate movement. The ALCO is scheduled to meet before November 7.

Bank officials, on condition of anonymity, said that SBI will take into account the the overall loan growth in corporate and the SME segment. “If there is a pick-up in corporate and SME loans, it may prefer to focus on this segment. However, if the growth in the corporate loan book is slow, the bank may consider extending the special home loan scheme,” a senior SBI official said.

SBI chairman OP Bhatt had told the media on Saturday that his bank was facing a huge liquidity overhang in the region of Rs 50,000 crore on a daily basis and of this about Rs 20,000 crore is being parked with the Reserve Bank of India. This implies that only if demand for corporate loans picks up sharply will SBI withdraw the scheme.

Although, the bank has seen good demand for loans in the second quarter ended September 2009, of Rs 30,000 crore against Rs 1,200 crore in the preceding quarter, given the huge base of SBI (Rs 5,80,237 crore), the incremental credit growth (April to September) is only 5.6%.

At the same time, its home loan book has grown 40% in the first six months of current year over the comparable period last year. The net home loan disbursement between February to September 2009 stood at Rs 8,274 crore against Rs 5,892 crore in the corresponding period last year. “Every month we have seen sanctions worth Rs 2,000 crore,” said Mr Kumaran.

SBI initially floated the special home loan scheme in February and in August in reduced rates further. It has approved 1,69,174 application for home loans and sanctioned loans amounting to Rs 17,537 crore since February.

Banking industry officials said that SBI may extend the scheme to December end since many state-owned banks such as Canara Bank and Bank of Maharashtra are offering similar competitive rates on home loans till December 31.

Central banks plan to raise gold holdings in view of dollar’s fall.
The Reserve Bank of India (RBI) today said it had bought 200 tonnes of gold from the International Monetary Fund (IMF) for around $6.7 billion. The deal would take RBI’s gold holding to the 10th largest among central banks.
India bought nearly half the 403.3 tonnes gold that the IMF decided to sell in September to raise resources for lending to low-income countries. Over the next five years, the multilateral body intends to provide an additional assistance of $17 billion to such countries.
The transaction, which was in the process of being settled, involved daily sales by the IMF between October 19 and 30, with each sale conducted at a price set on the basis of the market price prevailing that day.
The purchase will increase RBI’s stock of the precious metal by 56 per cent to 557 tonnes from 357 tonnes.
The deal comes 18 years after India pledged gold with the Bank of England to meet external obligations.
The deal represented one-eighth of the IMF’s total gold stock. This is the first time since 2000 that the IMF has sold gold to a central bank. Between December 1999 and April 2000, in separate transactions, the IMF had sold 12.9 million ounces of gold to Brazil and Mexico.
“The fall in the US dollar seems to be pushing all central banks to strengthen their portfolio with gold,” said NR Bhanumurthy, professor at the National Institute of Public Finance and Policy. “Gold is a safe store of value compared to the US dollar,” he told Bloomberg.
India’s foreign exchange reserves were $285.5 billion on October 23, of which gold accounted for just over $10 billion. The purchase will lift the share of gold from near 4 per cent to about 6 per cent, much less than most of the developed world but four times China’s.
“This is an important step toward achieving the objectives of the IMF’s limited gold sales programme, which are to help put the fund’s finances on a sound long-term footing and enable us to step up concessional lending to the poorest countries,” IMF Managing Director, Dominique Strauss-Kahn said in a statement on Monday

Sebi’s proposal of a restricted power of attorney will reduce misuse of broking accounts.
Six months after opening a trading and dematerialised account, Pawan Seth was surprised to find 60 per cent of the money in his account missing. He inquired and discovered the sub-broker was trading on his behalf and had made losses.
When he launched a complaint with the broker, he was informed the sub-broker had the power of attorney (PoA) and could operate the account without permission. This was part of the 60-page document (broker-client agreement) he had signed.
“This is a common practice these days that franchisee and sub-brokers follow. They get commission based on the amount of brokerage they generate. So, they operate the customers’ account and trade regularly – many times without their knowledge,” said an executive with a brokerage account.
This is why stock exchanges and the Securities and Exchange Board of India (Sebi) are flooded with numerous disputes between brokers and clients, arising due to misuse of power of attorney. In the past, the market watchdog had asked the stock exchanges to declare investor-broker disputes on their websites. The total number of complaints from clients listed on the Bombay Stock Exchange and National Stock Exchange was 5,681 between March and October-end.
And so, yesterday, Sebi proposed the PoA be restricted to only a few things. These include, transfer of shares and money to the broker with whom the client has the account. The broker cannot transfer the money or shares to another group company. Sebi also suggested brokers should send SMS messages for every transaction that takes place in the client’s broking, demat and banking account. Brokers are also supposed to send either the original PoA documents or a certified copy to the client, said Sebi. But these are just at the proposal stage; the market regulator has sought opinions from all interested parties.
“There were no existing guidelines because such regulations would be a part of the commercial practice. This is the first time Sebi has tried to standardise the norms brokers should follow while getting into a PoA,” said R Mohan, chief compliance officer at India Infoline.
The Bombay Stock Exchange, on its part, recently came out with an advertisement where it said clients should make sure the PoA is given for a limited purpose, regarding only the movement of funds and securities for exchange-related settlements and margin obligations.
But the problem goes deeper. Many are not even aware that they are signing on a PoA. “With some brokers, clients may even need to make over 60 signatures while getting a trading and demat account,” said Praveen Malik, head of compliance at Centrum Broking.
Due to the lack of any regulation, every brokerages have their own set of PoA regulations, that favoured them. In some cases, the PoA even allows a broker to open and close accounts on behalf of the client and to trade.
There are few a things a person can do to avoid getting in a dispute with the broker. For one, investors should remember the PoA is not a compulsory document. “Presently, clients are not legally bounded to get into a PoA agreement,” said Mohan. But, a broker may not process the application till the customer signs on the PoA. Also, clauses in the client-broker agreement still give brokers the right to freeze accounts in case of delayed payments.
It is necessary that you read through the clauses to see if the broker can operate your account. Also, do not leave the space blank that ask you to authorise a person to operate your account. Cross it out in case you don’t want anyone specific to trade.
In case you authorise the broker, sub-broker or the franchisee to operate on your behalf, make sure you mention the bank and trading account these intermediaries can operate. And, once you have filled your forms, keep a photocopy. Also, get a certified true copy or the original PoA agreement from your broker.
Some brokers even pledge clients’ shares, in case of delayed payment. If Sebi’s proposal comes into force, this will not be possible. But till then, ensure that the broker has not included such a clause in either the PoA or client-broker agreement.

Mahindra Finance, the non-banking finance arm of the Mahindra group, saw its net profit double in the second quarter. Recently, it also crossed the one million customer mark. In a conversation with Sudeep Jain, the company’s managing director, Ramesh iyer, talks about their core commercial vehicles’ finance operation and the new lines of business the group plans to enter. Excerpts You planned to enter a host of new businesses such as asset management, loans against gold and equipment finance. How are those efforts shaping?
As far as the AMC (asset management company) is concerned, our application is with Sebi (Securities and Exchange Board of India). So, that business may not start this financial year. For loans against gold, we have started a pilot project in western and southern India. This is a business which we will grow well, because we know that the segment of customers we work with do have gold. As far as construction equipment and commercial vehicles is concerned, we have started that activity on a selective basis, as it requires a different skill set. It is a high-value asset and the ability to understand the cash flow of the customer is very important.
Don’t you think the AMC space is already quite crowded?
Our focus will be the semi-urban and rural market and we will design products that suit that market. You won’t necessarily see us competing with the other AMCs in the urban market.
Are there any other new lines you plan to enter?
Not really. One of the things we are most passionate about is rural housing. Our rural housing subsidiary has been operational for a year now and that business turned profitable in the first half. That will be the story of the year and going forward, that business should see phenomenal growth.
Our insurance broking business is also doing well. There we need to increase the penetration into Mahindra Finance’s existing customer base.
It started off with a 10-15 per cent penetration and now is around 40 per cent. Before the end of this year, we want to take it to 60-70 per cent.
How have things been on the liabilities side?
A year before, our dependence on mutual funds was higher; now that has come down. Now, we have good lines of credit from various banks. So, in a way, banks have replaced mutual funds. The cost of borrowing over the past one year has come down by at least four to five percentage points.
In the monetary policy review, the Reserve Bank of India has said the risk weight associated with loans by banks to NBFCs will depend on the latter’s credit rating. Will that impact your cost of funds?
We have an AA- rating. It will not necessarily reduce our cost of funds. Probably, it will push up the cost of funds for NBFCs with poor ratings. Today, our marginal cost if I take a fresh loan for three years is 8.5-9 per cent. I don’t see that coming down because of this rating.
How is your core commercial vehicles finance business doing?
It couldn’t be better. In September, we financed 20,000 vehicles. In October, we did about 25,000. Overall, all manufacturers have done well. And all of them are looking at rural as a big opportunity, whether it is Maruti, Hyundai. Being present in rural India, we get the benefit. In addition, liquidity conditions have improved significantly.
What is your current headcount and do you plan to hire more people?
We currently have around 6,000 people. In the last two months, we have added 45,000-50,000 customers and the excitement is till there.
The way we are growing, we should recruit 500-plus people very soon.

SINGAPORE: Oil prices were lower in Asia on Thursday as traders took stock of weak fundamentals in the market, analysts said.New York's main contract, light sweet crude for December delivery, shed 34 cents to 80.06 dollars a barrel.
Brent North Sea crude for December delivery slipped 53 cents to 78.36 dollars. Prices eased after breaking through the 80-dollar mark in New York on Wednesday, reflecting concerns over weak demand, analysts said.

"The fundamentals of the markets are still weak... and there are no signs of steadily growing demand," said Jason Feer, Asia-Pacific vice-president of energy market analysts Argus Media in Singapore. He added that data released by the US Department of Energy (DoE) on Wednesday showing an unexpected dip in US crude reserves was "overall not that much" in the larger scheme of prices.

The DoE announced that crude reserves in the world's largest energy consumer sank by four million barrels in the week ending October 30, surprising analysts, who were expecting a rise.Oil prices have climbed as commodities gained a boost from gold futures, which have struck a series of record highs.

The price of gold surged to a peak in the wake of the International Monetary Fund's massive sale of the precious metal to India. Gold and other commodity prices have climbed in recent months amid a move away from the dollar, which has been slumping. The move accelerated last month on a report that Gulf states may stop using the greenback for oil trading.