MUTUAL FUND

Entry load abolition will benefit MF industry: Religare AMC

NEW DELHI: Private sector mutual fund house Religare AMC, a relatively new but fast-growing player, today said that abolition of entry load charged  to investors will benefit the company and the industry as a whole.

"The abolition of the entry load this year is expected to bring about a sea change in the way the AMC business functions," Religare Asset Management Company's CEO and MD Sunil Godhwani said.

The development would benefit Religare's mutual fund business going forward, he added.

The company has increased its market share to 2.2 per cent from 0.8 per cent, while its assets under management (AUM) have grown to $2.96 billion (around Rs 14,500 crore) for August 2009 from $300 million in November 2008.

While the company remains a small player compared to many others, it has moved up to the 13th position among the three dozen AMCs operating in India. It had entered the segment with acquisition of Lotus AMC in November 2008.

"The success story of the AMC business is reflective of our style of managing various businesses as well as the way we have empowered our capable management team that crafted the success story," Godhwani said.

Religare AMC has more than 2,00,000 clients and a presence in more than 50 cities. Combined average AUM of the country's 36 fund houses have reached Rs 7,49,911.91 crore at the end of August.

http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/MF-News/Entry-load-abolition-will-benefit-MF-industry-Religare-AMC/articleshow/4968255.cms

Systematic investments work well in MF scheme

MUMBAI: You don’t have to tell anyone these days that mutual funds (MFs) are the most convenient form of investing, especially for small or individual investors. However, when it comes to options available within MFs—for example, systematic withdrawal or systematic transfer—most people would plead ignorance. Its the same with trigger option available with mutual funds.

However, most people would be somewhat familiar with systematic investment plan or SIP, thanks to the publicity given by most financial experts . “It is true that most of our clients are familiar with the concept of SIP, but the others are yet to catch up in a big way,’’ informs Suresh Sadagopan, chief financial planner, Ladder7 Financial Advisories. Let us start with Systematic investment plan or SIP.

For those who came in late, SIP is very similar to a regular recurring deposit in a bank account. You draw a cheque in favour of a particular MF scheme and specify you want to invest for, say, next 12 months. The money will be taken from your bank account every month and invested in the scheme of your choice.

Why is this method preferred by financial experts? One, this gives you discipline. Two, you wouldn’t be unnecessarily influenced by stock market movement, and stop or increase your investments. Three, you would benefit from cost averaging. That is, when you buy MF units at regular intervals, the average purchasing cost could give higher returns. Systematic investment plan can be used by any investor eyeing the market in a particular period of time. However, it is not the case with systematic withdrawal or transfer plan or using triggers. These tools would work only for a particular class of investors. “Systematic withdrawal plans are useful for particularly retired people, whereas systematic transfer plans are useful for people with large amount, but don’t want to invest in the market at one go,’’ says Suresh Sadagopan.

Systematic transfer plan allows an investor to withdraw a certain sum from the scheme at periodical intervals. “It is often used somewhat like annuity by retired people. However, the concept is yet to take off,’’ says a MF investor. Systematic transfer plans, on the other hand, is useful for investors who suddenly find themselves flush with funds.

Tired of filling several application forms to invest in different mutual fund schemes? Wait till March 2010, and you’ll just click this cumbersome process away.
The advisory committee of the Association of Mutual Funds in India (Amfi) has finalised a proposal containing recommendations for a common platform to provide easy access to investors and distributors to reduce costs, improve efficiency and save time. To begin with, investors will have to register with a designated agency that will give them unique identification numbers, which could be their permanent account numbers, and passwords. Through this, they can log on to a website, transact and access information, including the value of all their mutual fund investments.
The system is akin to the one adopted by the Pension Fund Regulatory and Development Authority (PFRDA), where you can approach a designated point of presence, register for the New Pension Scheme (NPS) and receive a Permanent Retirement Account Number (PRAN). The number also entitles you to track your investment, for which records are maintained by a central recordkeeping agency.
Amfi Chairman AP Kurian said, “We are working on a technology-driven common platform to provide easy access to investors and distributors. It will help fund houses improve their efficiency. Besides, transactions will be faster, thereby saving time and costs. And ultimately, it will provide a wider reach to investors.”
Currently, there are many mutual fund offices, distributors and franchisees in the industry. Investors submit their applications through these channels. From here, the applications go to the registrar and transfer (R&T) agents for processing and sending their account statements.
“This process is paper-oriented and time-consuming. Through a common platform, we are trying to reduce the paperwork as much as possible and connect the brokerages,” added Kurian.
According to Jaideep Bhattacharya, chief marketing officer of UTI Mutual Fund, the step is essentially to empower the investor with choices. “Once you empower the investor, the revenue will automatically increase. For instance, there will be a common application form for different mutual fund schemes, and one need not go to different fund houses for different application forms. Once this proposal is implemented, all the information will be just a click away,” he said. Bhattacharya is also a member of the Amfi’s advisory committee.
“It’s an investor-centric initiative. Instead of receiving several statements, an investor would get only one statement. For technology-savvy investors, statements will be available at a click. We want to go step by step. We are targeting March 2010, by which the new mechanism would be in place,” said Kurian.
Several other chief operating officers Business Standard spoke to also said that the measure was the need of the hour. It would help increase penetration in Tier-II and III cities with relatively lesser costs.
At a time when entry load has been banned by the Securities and Exchange Board of India and the Reserve Bank of India has, in its annual report, expressed concerns over the over-dependence of fund houses on corporate and institutional money resulting in poor rural penetration, industry experts feel that such a common platform will help fund houses address these issues.

MUMBAI: General insurers witnessed a growth of 13.8 per cent in premium collection for the month of July at Rs 2,856.42-crore as compared to Rs  2,508.92-crore in the same period last year, IRDA said.

Private-sector general insurers earned a premium of Rs 1,176.02-crore, up 14.2 per cent, as against Rs 1,028.98-crore in the corresponding period last year, IRDA data said.

ICICI-Lombard collected a premium of Rs 260.02-crore for the month of July as against Rs 284.32-crore in July 2008.

Bajaj Allianz, Reliance General, IFFCO-Tokio and HDFC ERGO General insurance earned a premium of Rs 215.01-crore, 170.48-crore, Rs 127.06-crore and Rs 109.87-crore, respectively, in the month of July, the data said.

Public sector general insurers collected Rs 1,680.40-crore as premium in July, a growth of 13.5 per cent, as compared to Rs 1,479.94-crore in the same period last year.

United India collected a premium of Rs 384.13-crore in July this year as against Rs 324.48-crore during the previous year and New India's premium collection was Rs 509.02-crore in the period under review as compared to Rs 442.18-crore in July 2008.

National Insurance and Oriental Insurance collected a premium of Rs 362.78-crore and 424.47-crore, respectively.
http://economictimes.indiatimes.com/Personal-Finance/Gen-insurers-premium-coll-up-in-July/articleshow/4968853.cms

Come Oct 1, you can exit health policy within 15 days

Now, people buying health policies with a cover for three years or more can surrender them within 15 days if they are not satisfied with the terms and conditions of the agreement. This will be effective from October 1.
According to the Insurance Regulatory and Development Authority (Irda), “All health insurance policies with duration of three or more years will have a provision that on the first inception of the policy, the insured has a period of 15 days from the receipt of the documents to review the terms and conditions of the policy.”
However, the free look-in period is already available for life insurance policies and policyholders have the option of returning it within 15 days if they are not satisfied with the terms and conditions.
In addition, Irda said that the policyholder would be entitled to a refund of the premium paid, excluding expenses incurred by the insurer on his medical examination and stamp duty charges.
“Any failure to do so would render them (general insurance companies) liable to appropriate action under the provisions of the Irda Act, 1999, the Insurance Act, 1938, and the regulations framed thereunder,” Irda said. If the risk has already taken place when the option of returning the policy is exercised by the policyholder, the refund of the premium paid would also be subject to a deduction for proportionate risk premium for the period on cover.
“Where only a part of the risk has commenced, such proportionate risk premium shall be calculated as commensurate with the risk covered during such period,’’ Irda said.

State-run life insurance major LIC today said it would invest Rs 1 lakh crore in the equity market in the current financial year, up from Rs 35,000 crore during 2008-09.
“We have already invested Rs 40,000 crore in the stock market in the first four months of the current financial year and by March 2010, the company would invest an additional Rs 1 lakh crore,” LIC Zonal Manager (North) Vinay Kumar Sinha said.
LIC had invested about Rs 35,000 crore in the equity market during 2008-09, he said. Such a large investment by the country’s biggest domestic financial institution will boost sentiments at bourses, which witnessed volatility, especially after the collapse of Lehman Brothers in America last October.
Having crossed the 21,000 points-mark in January 2008, the Bombay Stock Exchange benchmark index (Sensex) nosedived to around 8,000 points last year itself.

Separate rates for retail, corporate customers likely.
Banks could soon have separate benchmark prime lending rates (BPLR) for corporate and retail borrowers with the rate for the latter expected to be a tad higher.
A committee appointed by the Reserve Bank of India (RBI), which met here today, is however expected to keep home loans outside the new regime. Bankers who attended the meeting said in the retail segment, where there were too many products with smaller ticket sizes, there was a suggestion that pricing for some categories like home loans could be dealt with separately.
The panel, comprising representatives from banks, was set up following an announcement in the annual policy statement in April on the need to bring greater transparency in pricing of risks by banks. At present, nearly 75 per cent loans are extended below BPLR. The committee is headed by RBI Executive Director Deepak Mohanty.
Bankers present at the meeting said there was a broad agreement on the need for separate prime lending rates for corporate and retail borrowers. But the final view was yet to be taken, they said.
“In the discussions today, the problem of housing came up. Should housing be kept out of the prime lending rate. Similarly, there were discussions over facilities below Rs 2 lakh,” said Indian Banks’ Association’s Chief Executive Officer K Ramakrishnan. The committee’s report is expected to be finalised later this month.
Though banks in India have a single BPLR, ICICI Bank has separate benchmark rates for corporate and retail customers. While the floating reference rate, used for retail loans, was fixed at 12.75 per cent, the bank’s benchmark advance rate was revised to 15.75 per cent in June.
At present, BPLRs of banks range between 11.75 per cent and 15.75 per cent.
“The rates will be computed on the basis of risk-based modelling and operating costs,” said a banker present at the meeting. Computation of the base rate was another area that was discussed in detail. Though bankers suggested that banks should factor in the cost of funds set aside for meeting statutory liquidity ratio (SLR) and cash reserve ratio requirements, RBI turned down the proposal related to SLR holdings.
The cost of deposits, the borrowing cost as well as the opportunity cost of keeping funds to meet the cash-reserve ratio (CRR) norms could form the basis for calculating the base rate, bankers said. However, the indicative rate for CRR is yet to be decided as RBI does not pay interest on these funds. Bankers have been seeking payment of interest on this money for long.
Typically, banks add the cost of providing service and the cost of covering risk to the cost of funds while fixing rates.
While the BPLR mechanism might undergo a change, bankers said sub-BPLR lending was here to stay. Bankers were of the view that the rates would depend on liquidity conditions.
“Sub-PLR lending will depend on liquidity and demand for money. There will be some sub-PLR lending in a highly liquid market,” said a banker.
Punjab National Bank is the only lender in the country that has went on record saying it will not lend below BPLR to its corporate customers. PNB has the lowest BPLR (of 11 per cent) among commercial banks.

As of now, promoters who raise money through public issues have to go for follow-on offers or rights issues, which many of them are not comfortable with. So, promoters of many listed companies would sell their stake to private equity firms. But with Sebi permission to make offer for sale, they can avoid their shares getting concentrated in a few hands.
In fact, the market regulator today replaced the Disclosure and Investor Protection (DIP) Guidelines, 2000 with the Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2009 to prevent frequent changes in the norms, besides giving them a legal sanctity.
ICDR would govern all disclosure norms regarding securities and no changes to this can now be made without the consent of Sebi. The new regulations have been issued by the regulator under Section 11 of the Sebi Act, 1992. The changes follow recommendations by Sebi’s Primary Market Advisory Committee, chaired by leading banker Deepak Parekh, set up to simplify the procedures governing various capital-raising measures.The new regulations also contain provisions pertaining to regulation of the activities of merchant bankers, debenture trustees and registrars to an issue.
Consequential amendments have also been made to the Sebi (ESOS and ESPS) Guidelines, 1999 and the Equity Listing Agreement through circulars issued today. Sebi has clarified that a company making a public offer can allot shares only to its own employees and not to employees of its parent organisation or subsidiary under the employee quota.
The new regulations put all companies on a par. Earlier, government companies were enjoying some exemptions in case of filing of results and in eligibility criteria in filing for initial public offers (IPOs). Now there will be no preferential treatment given to any one.
Strategy and Planning Vice President Harshad Apte said, “The DIP guidelines have been changed in keeping with changing times. However, the companies that have filed draft prospectus and received comments will not have to refile them to confirm with the new norms.”
Sebi has also issued another circular under Section 11 of the Sebi Act, read with rule 19(7) of the Securities Contracts Regulation Rules (SCRR), 1957 in respect of matters relating to listing of securities under the SCRR, hitherto contained in the rescinded guidelines.
One of the significant amendments to the listing agreement makes it mandatory for a listed company, which desires to make a further public offer through the fixed price route, to notify stock exchanges at least 48 hours in advance about the meeting of its board of directors for determination of the issue price. Also, companies willing to offer ESOPs will have to make disclosures to the exchanges in a format specified by Sebi.

Our Bureau
Mumbai, Sept 3 The Securities and Exchange Board of India is turning a stricter eye on company promoters who have been issued preferential warrants, saying that they will have to forfeit the upfront payment made on unexercised warrants.
This is contained in its recently notified Issue of Capital and Disclosure Requirements (ICDR) Regulations 2009, which SEBI made public on Thursday.
These regulations replace the Disclosure and Investor Protection (DIP) Guidelines 2000 that now stand rescinded.
In the matter of preferential warrants, SEBI’s new norms are probably meant to contain the situation following January 2008, when the stock market crash brought the price of several shares below the warrant exercise price for promoters, several of whom decided not to exercise their warrants in full. Promoters will now have to be more careful, as their upfront payment made only against exercised warrants will now be adjusted, said an expert familiar with regulatory matters.
The ICDR Regulations have been primarily created by conversion of the SEBI (Disclosure and Investor Protection) Guidelines 2000, a SEBI circular said.
Tighter norms
SEBI has made some alterations in the matter of group companies; if the promoter of a debarred company is also a promoter, director or person in control of any other company, even that company would now be barred from accessing the capital markets.
The new norms also ban firm allotment to privileged people, who generally used to be relatives, associates or friends of promoters or promoters’ group. Even these categories have to apply through the regular process. Promoters with majority shareholding in a listed company can offer shares to the public straightaway.
This would help the Government, as it is keen on disinvestment opportunities.
Only promoters whose identity, photograph, etc., are disclosed in the offer document shall be recognised as ‘promoters’.
Public Issues
“With the notification of the regulations, there will be a credible and stable framework for disclosure and investor protection, which would go a long way in streamlining the process of issue of capital,” an expert familiar with SEBI matters said.
According to the new ICDR Regulations, the allotment/refund period in public issues has been reduced to 15 days for both fixed-price and book-built issues.
The new regulations have also removed the exemption available to banking companies for IPOs; these companies had until now enjoyed exemptions on norms such as track record, minimum tangible assets, distributable profits, etc.
The issue period for infrastructure companies has been brought on a par with that for other companies, and is now down to 10 days from 21.
As institutional and mutual funds have a separate window for allotment through QIPs now, SEBI has removed mandatory firm allotment to them as it has become redundant.
However, a shareholder of a listed company whose group/sister concern is coming out with IPO, will have a special reservation window.
“The ICDR Regulations would empower the regulator to deal with non-compliance with appropriate enforcement actions, which would be legally sustainable,” said a legal expert.
Some provisions under the earlier DIP guidelines (now rescinded) have been incorporated in the equity listing agreement. In the case of follow-on offers SEBI has introduced a sub-clause to Clause 19 in the equity listing agreement, saying a minimum 48-hour intimation should be given to the bourses of any proposed Board meeting for determination of issue price. Earlier Clause 19 was about prior notification to the stock exchanges, while it directed companies to give 7 days’ prior notification to stock exchanges in case of buyback of securities, declaration/recommending of Dividends, Rights Issue, Issue of Convertible Debentures.

OTHERS

Now, SMS alerts from banks and airlines for a price

NEW DELHI: You may soon have to pay for your mobile alerts from banks and airlines which you currently get for free. Free and bulk SMS providers in India like SMSGupshup, MyToday, Way2SMS say that industry is up for disruptions even as large operators like Airtel, Idea, Tata Teleservices have entered into interconnect agreements which allow for a 10-15 paise charge on each SMS to be paid to the network which has received them.

Currently, bulk text messages are sold for as low as 4-5 paise per SMS, and costs might go up to 20 paise per SMS if operators start charging 10-15 paise for termination (the network receiving the SMS). At present, free text messages are used by banks, travel operators, airlines, hotels and restaurants to alert consumers about their ticket bookings, bank accounts, or new offers. Health departments in many states have also started using the service to spread awareness about swine flu. Many coastal states use free SMS to send disaster warnings to citizens. Many panchayats use it to spread awareness about new crops or cattle health.

The result. Free text messages may become paid in many services for consumers. On the other hand, it may impact the fledgling Rs 70-crore text message marketing industry. Besides, consumers may get less marketing text messages too.
Says Abhijit Saxena, CEO of Netcore Solutions and provider of MyToday brand of free news, stocks and sports SMS feeds: “The agreements between operators like these may completely wipe the free SMS industry out. It’s a disruptive thing and there is no way we could be profitable by providing an SMS at 20 paise. Free SMS alerts may become paid with these agreements.” Companies like Netcore operate on an advertising revenue-based model for survival, where in a free SMS is inserted by a text ad.

Hyderabad-based V V Raju, CEO of Way2SMS, one of the largest free SMS service provider with over 50 lakh subscribers, also feels the move would adversely impact the fledgling industry. “However, he feels that VAS providers will have to enter into deals separately with operators now,” Way2SMS also provides free email alerts via SMS on mobile phones.

An SMSGupshup official, however, said that they were deeply concerned and were redesigning their strategy because of this move by the operators last month. Many companies under the Internet and Mobile Association of India are planning to approach the telecom regulator Trai to regulate the operators. “We are going to fight it out with Trai as our members are affected by it. Levying high interconnect SMS charges will impact the industry,” says Subho Ray, president, IAMAI.

But it might not bear too much fruit as regulations allow interconnect charges. Says telecom consulting firm BDA Connect’s Kunal Bajaj: “Currently, SMS interconnect charges are under forebearance by Trai which means operators can charge any amount for termination. On the one hand, large operators might gain in the short term from this move. But in the long run, they may lose as it will wipe out the free SMS industry.”

In contrast, an official from a large operator said that it is unfair for VAS industry to say that they should not pay up if they are using our network. On the other hand, many in the VAS industry suggest that interconnect charges should remain low at 1-2 paise to allow for profitability.

Says Mobile marketing association’s India co-Chair Rajiv Hirnandani: “Already, marketing through industry was ailing with regulations like Do Not Disturb. This move will impact it more.” Currently, the SMSes which you get on the mobile have two letters pre-fixed to them. For instance, a ‘TM’ message might mean that it is sent from Tata Tele Maharashtra.

http://economictimes.indiatimes.com/Now-SMS-alerts-from-banks-and-airlines-for-a-price/articleshow/4969751.cms