Year: 2007

The finance ministry has ordered the recasting of the boards of all listed public-sector banks, cutting down the number of shareholder directors by 50% while raising the number of government appointed “independent” directors.

Extremely Bad Decision as the government’s grip on public-sector banks will increase.

In a related development, the government has also withdrawn its own directors as well as the Reserve Bank of India’s directors from the management committees of bank boards. This key board committee is responsible for clearing all big-ticket loans that cannot be cleared by the CEO of a bank. The loan-sanctioning power of the public-sector bank CEO is limited to Rs60 crore at small banks and Rs100 crore at big banks. This reminds me of the series of co-operative banks that went bankrupt in between late 90s and 2002 because of involvement of corrupt directors.

Bank CEOs, in private, say that while such nominees are technically independent professionals, in reality most of them are political appointments and normally belonging to the party in power. For instance, one so-called independent director who is set to join a large Mumbai-based bank is Rani Satish, the former minister of state for Kannada and Culture from the ruling Congress party.

“On what basis do I remove a shareholders’ nominee?” asks a visibly frustrated chairman of a very large public sector bank, who says the timing of the government decision is unfortunate because public-sector banks need more outside expertise at a time when they are trying to compete more aggressively with private banks that can attract a more diverse board.

The terrible decision by government to recast public sector bank boards does not technically abide by the capital market regulator’s norms on independent directors on the boards of listed entities. In accordance with Clause 49 of the listing norms, all listed corporations should have 50% independent directors on their boards.

Hopefully the rating agencies like Fitch and Moody’s will downgrade India to RISKY category.

India’s leading Private Bank, HDFC Bank is an arrogant bank and sucks badly in customer service.

Here is a Case Study on how HDFC Bank has violated the norms of Association of Mutual Funds of India in providing online mutual fund access to its consumers. I am one of the victim.

I bought units worth Rs 5,000 in Tata Index Fund Nifty Plan – Option A – Dividend Reinvestment. I had downloaded and read the offer document twice before investing. After my initial investment, the market fell and I wanted to BUY some more units, say worth Rs 2,000. I log on to my HDFC Bank and I was shocked that their interface doesn’t let me invest less than Rs 5,000. I bought this to the attention of customer service and they are writing back that it has been clearly mentioned in terms and conditions. I wrote back saying HDFC Bank cannot float its own norms and they have to follow AMFI and Terms mentioned in the offer document. Unfortunately, I can’t sue them because of WEAK legal system in India.

Here are the screen shots to prove my point.

This is how HDFC Bank takes customers for a ride. I would advise all our readers to stay away from HDFC Bank’s Online Mutual Fund interface for investing.

ITC has resolved to launch snack foods, to widen its portfolio of consumer goods and foods. ITC is India’s top cigarette maker that also has interests in hotels, paperboard, apparel, retail and information technology, already sells ready-to-eat foods, biscuits and confectionery.

ITC has estimated that branded snacks segment is growing at 30% annually. The category is dominated by unbranded regional firms. ITC’s Bingo brand will initially sell varieties of potato chips and finger snacks priced at Rs 5 and Rs 10.

I am a little bit confused as to what is the core business of ITC now ? You thoughts 🙂

On 13 March 2007, Dabur India had announced its plans to enter the organized retail market in India, through its wholly-owned subsidiary, H&B Stores (under incorporation). The Burman Family sold their stake in Punjab Tractors Ltd to pump cash into the retail venture.

The company will invest Rs 140 crores by 2010 to enter the retail market in India with a chain of stores on the Health & Beauty format. The company plans to establish stores ranging from 1,500 sq ft to 6,000 sq ft in size, offering international quality store environment and product range.

Three senior professionals and experts from the global retail industry have been roped in to drive the company’s retail foray. This venture is also synergistic with the company’s current portfolio of Ayurvedic & Herbal products and would add significantly to the company’s distribution footprint.

Torrent Cables is a leader in high-tension power cables. Its integrated manufacturing is equipped with the most advanced and well-accepted technology for the manufacture of XLPE-insulated cables up to 66 KV.

Major customers of TCL consist of private players engaged in the distribution of power, industrial houses, engineering, procurement and contractor (EPC) construction and state electricity boards (SEBs).

Of its various listed competitors (Universal Cables, Industrial Cables, Cable Corporation of India, Nicco Corporation, Fort Gloater Industries, RPG Cables, Polycab Wires, and Uniflex Cables), TCL is the most preferred and financially sound. Private sector power distributors — TCL’s main clients — are performing well and they are expected to maintain a similar trend. Public sector companies are also going private and working very hard to cut their T&D losses to improve their bottom line.

Insulated power cables are very safe means to transmit and distribute power among a large numbers of customers, eliminating power theft and reducer transmission and distribution losses considerably. Liberalization in the power sector is expected to create competition among distribution companies and the pressure to perform better will result in higher demand for insulated power cables. Overall, the entire sector is expected to do well in future.

TCL bravely faced rough weather in the recent past. During the turbulent times, TCL undertook a program for massive optimisation of its operations and reduction in cost. The company adopted the policy of cost-consciousness, waste reduction and improving competitiveness. Infusion of Rs 20-crore interest-free funds by the promoters in FY 2004 significantly supported the company’s efforts into reduce interest expenses. Today, TCL is one of fastest-growing and its products are perceived in the market as one of the highest quality yet available at competitive prices. Besides, unlike most others, the company is meeting all its delivery commitments on time.

Besides, the government’s initiatives on power sector reforms have resulted in an increase in demand for power-related products, including cables. Presently, India faces a 10-12% gap in supply of and demand for power. A rural electrification programme has been initiated to ensure electrification of all villages by 2009. There has also been a continued effort to upgrade and modernise the power distribution network. With all these developments, the power industry would attract increased investment. This means more demand for power cables. With this in mind, the cable industry is also working towards increasing its capacities.

TCL’s sales rose 55% to Rs 50.73 crore and net profit was up 66% to Rs 7.02 crore in the quarter ended December 2006 over the quarter ended December 2005. In FY 2007, we expect TCL to register sales and net profit of Rs 186.88 crore and Rs 18.95 crore, respectively. On an equity of Rs 7.48 crore and face value of Rs 10 per share, EPS works out to Rs 25.3. At Rs 179, PE is just 7.1. Long Term Investors can BUY Torent Cables.