Indian companies favourites of FIIs and MFs

MUMBAI, Oct 6: Retail investors have vested tremendous confidence in shares of multinational companies, where as foreign and domestic funds seem to be thinking just the opposite.

Even in the case of open offers made recently by Cadbury, Reckitt Benckiser, Philips, Hoganas, Otis, Carrier Aircon, institutions were the first to surrender their holdings in the open offers, retail shareholders, on the other hand, exhibited luke-warm response.

As per the official data for June 2002, Foreign Institutional Investors (FIIs) and Mutual Funds (MFs) which held 7.1 per cent and 5.13 per cent in Cadbury India respectively had surrendered the shares in the first open offer in January 2002.

In the case of Reckitt Benckiser (India) also, FIIs and MFs which held 1.6 per cent and 6.08 per cent respectively had surrendered all the shares during the first offer which closed in June 2002. After the first offer, Reckitt Benckiser PLC held 87.3 per cent followed by 12.7 per cent retail shareholders.

Among the MNC stocks, FIIs and MFs have more than 10 per cent stake in digital globalsoft, HLL, Cummins and ITC. Nestle comes in the second rung amongst the favourites category with a little over 8 per cent holding.

The most surprising fact was that FIIs hold only 175 shares in Kodak India despite the strong brand. It was seen that holdings of FIIs and MFs in seven MNCs out of 20 were nearly nil whereas, the FIIs and MFs holdings in the Indian companies were in the range of three per cent to 48 per cent.

"There are two reasons for the FIIs and MFs stand on MNCs, most MNCs are delisting themselves from the bourses, while their investment in Indian companies shows that their investment in Indian IT companies was higher than MNCs as most of these IT companies are Indian companies," says Jignesh Shah, strategist, ask Raymond James Associates, a leading investment bank.

FIIs and MFs holding in HDFC was highest at 48.3 per cent and 4 per cent cent followed by Satyam Computer 38 per cent and 10.2 per cent, Infosys 36 per cent and 6.7 per cent Zee Telefilm 27 per cent and 5.7 per cent Grasim 23.3 per cent and 9.4 per cent, Hero Honda 23.2 per cent and 5.2 per cent and Dr Reddy’s Lab 22.9 per cent and 3 per cent and Ranbaxy 20.9 per cent and 5.7 per cent.

The FIIs’ holding in each of the companies like Balaji Tele, Reliance Industries, Gujarat Ambuja and State Bank of India is about 19 per cent.

In the case of FIIs holding in MNCs, FIIs and MFs stake in digital global soft was 14.2 per cent and 16.6 per cent respectively.

FIIs and MFs holding in FMCG Major Hind Lever was 13 per cent and 3 per cent, the FIIs and MFs hold 12 and 7 per cent in Cummins while it was 10.5 and 13.2 per cent in tobacco giant ITC.

In Nestle, the FIIs and MFs hold 8.5 and 7.3 per cent while Otis the FIIs hold 4.8 per cent and while MFs were nil.

The FIIs and MFs hold 3 per cent and 7.9 per cent followed by Colgate Palm 2.8 per cent and 2.3 per cent.

The FIIs and MFs holding in Castrol, Pfizer, Gillete, Reckit, Wartsila, Cadbury, Philps, Kodak, Hoganas, Mico, Carrier Aircon was almost nil in June 2002. (UNI)

Its credit to meet short term cash needs: Bankers

MUMBAI, Oct 6: The high cost of "service charges" on credit card users in India is mainly due to "uneconomically low volume" of credit card transactions on a high-cost technology platform, according to bankers involved in card business here.

Critical on the reports of high interest cost for card users, bankers said there was no uniform "interest cost" on credit cards because of it was "service fees" that were uniformly distributed among the card users.

The high services charges resulted from implementation of high cost global it platform coupled with low volume of card business transactions.

"Owing to low user base, the cost of card business is being distributed as service fees among the limited number of users", said an chief executive of card business in a foreign bank.

The executive who does not want to be named told UNI that in credit cards, an user get interest-free cash for spending for 30 to 40 days and banks do not get any return on such "cash out" of its own funds.

In fact, in India, majority of card holders availed one-time credit on cards and pay back the entire dues on card at the end of initial 30 to 40 days credit, depriving banks from imposing revolving credit fee charges to the users.

The Reserve Bank of India (RBI) has nothing to do with the service charges imposed on credit cards by the commercial banks, said RBI spokesperson and added that it was one of the products of the commercial banks for their customers and the charges may vary from bank to bank. Majority of bankers said there was no correlation between interest factors and the service charges on credit cards. There is no benchmark level for imposing interest rates on cards as in the case of housing, car and personal loans.

The viability of the credit card business in India has been suffering from high cost of maintenance card holders accounts such as monthly billing facility, 24-hour call centers and mailing of news letters and information packages.

"People do not understand that unlike any other banking services, credit cards system works on a highly sophisticated technology platform at global level",said an official from a public sector bank.

Today, the issuers of credit cards facing daunting tasks of identifying credibility and honesty of the prospective card buyers in india because of non-availability of credit information bureau and also lack of industry data. Unlike developed nations, persons above 18 year of age, are eligible to hold a credit card in India and most of the card holders are in salaried class with strong reservation against higher spending from their savings.

Inspite of several hurdles, the average annual growth in the number of credit card holders is 30 per cent while spending through cards is very restricted only in the urban centres which is about one-fourth times lower than to that of Malaysia and one-half times lower than Indonesia. Denouncing the observations made by a section of people that the credit card facility is an "unending debt trap", bankers said that these were the "wrong picture" given by the people who have little knowledge on the card business.

Unlike debit cards, credit card is an unsecured loan instrument for the people of credible track records to overcome their immediate requirement of cash either for medical treatment or travelling expenses or buying some essential items. The card users pay only the principal amount that they had availed without any additional cost within the last date of first billing, covering a period of 30 to 40 days.

Banks take the risk of offering credit to the card holders, even for a month without return, knowing fully aware that the law in india does not empower the lenders to recover the money from the borrowers, if something goes wrong in-between. "It is the high risk business that needs to be distributed among the limited clients", said an official from the State Bank of India (SBI).

He said that the default rate in card business in India is three times higher than that of hong kong and this trend may continue further unless the country build up a strong credit information bureau on the industry.

Further there is a need for Government to promote the card business at small towns with proper infrastructure because this could be a hassle free payment instrument to avoid black money transaction in the economy. Governments in South Korea and Japan encourage such spending through cards which is transparent across the globe.

While consumer spending in the developing economy like India is an welcome trend, this is being viewed much safer than traditional corporate lending by banks.

On positive factors, bankers said that the business in India is likely to grow further along with other Asian countries because of positive demographics dominated by majority young population, high savings rates, rising incomes among growing number of small family household and most significantly, a cultural change in the attitude to spending in pursuit of higher lifestyle. (UNI)

Rupee to stay rangebound as state-run banks
continue to buy dollars

MUMBAI, Oct 6: The rupee is expected to trade in a narrow range of 48.35-37 in the week amid dull import demand and state-run banks, reportedly acting on behalf of the Reserve Bank of India (RBI), absorbing the surplus export supply inflows.

Forward dollar premiums are also likely to stay stable with the benchmark sixth-month annualized premiums hovering around the 4.00 per cent level, dealers said.

During the last week ended October 4, the Indian unit was stuck within a tight one-paise range against the US dollar (USd) as State-run banks kept a tight leash on its upswings by mopping up excess dollar supplies.

Opening on a firm note at 48.36/37, the rupee’s movement was confined in a narrow band of 48.3550/3650 during the week which comprised only three working days.

While there were no deals in the forex market on Monday due to the half-yearly account closing of banks, the market remained closed on Wednesday on account of ‘Gandhi Jayanti’.

The rupee closed the week at 48.36/37, just one paise up from its previous week’s close of 48.37/38. The market remained very quiet and rangebound during the week in the absence of any fresh triggers, a forex dealer at a public sector bank said.

Though the dollar inflows from exporters and Non-Resident Indians continued and the importers stayed on the sidelines as it was the beginning of the month, the State Bank of India (SBI) and a few other nationalized banks were seen buying the dollar in a bid to stem the rupee’s appreciation, he added.

Forward dollar premiums drifted during the week on good receiving by banks. The easy liquidity in the money market, receding concerns on the West Asia front and retreating global oil prices also helped the southward journey of premiums in the forward dollar market.

The sixth-month annualized premiums finished the week lower at 4.01 per cent as compared to 4.11 per cent of the previous week.

In cross currency trades, the rupee appreciated by 12 paise against the Japanese yen to 39.38 (39.50) while it fell by 57 paise against the pound sterling to 75.90 (75.33) and 39 paise against euro to 47.71 (47.32).

In the current financial year, the rupee which appreciated by 44 paise against US dollar to 48.36 from 48.80, fell sharply by Rs 5.16 against the euro to 47.71 (42.55), Rs 6.38 against the pound sterling to 75.90 (69.52) and rs 2.61 against yen to 39.38 (36.77) as the greenback witnessed sharper falls in the overseas markets.

Meanwhile, the foreign exchange (forex) reserves of the country continued their unabated rise and gained further by US dollar (USd) 200 million to new record highs of USd 62,721 million during the week ended September 27.

The RBI’s weekly statistical bulletin showed that the entire growth in the total forex reserves was contributed by the ever-increasing foreign currency assets which shot up further by USd 200 million to USd 59,503 million while gold reserves and the special drawing rights (SDRs) remained unchanged at USd 3,208 million and USd 10 million respectively. (UNI)

Market yard at Solan comes up as major
vegetable and fruit centre

SHIMLA, Oct 6: Registering a daily business of about Rs 12 lakh, the regulated market yard at Solan has come up as a major vegetable and fruit trading centre in northern India.

With establishment of this market yard, farmers, especially from Shimla, Sirmour, Kinnaur and Solan districts of Himachal Pradesh, have been saved from problem of marketing of their produce, according to an official spokesman here.

A record business transaction of Rs ten crore has been done in this market yard since its inception three months ago.

A trade of more than 110 truckloads of tomatoes, cauliflower, cabbage, capsicum, brinjal and potato is being done daily in this market. Fruit such as apple, pulm, aprocot, peace, pear and banana are also marketed in the yard.

Traders from far-off places such as West Bengal, Uttar Pradesh, Maharashtra, Delhi and Chandigarh come to the market yard for purchase of fruit and vegetables. This has resulted in providing remunerative price to farmers who do not have to pay any commission or fee for marketing of their produce. They sell their produce through open auction.

The market yard is provided with the internet facility that enables growers to know the rates of fruit and vegetables prevailing in different markets in the country.

The spokesman said in view of the fact that Solan district had been leading in vegetable production, nine additional sub-markets had been established in the district.

Emphasis is being laid on construction of link roads in the district so that farmers do not face hardships in transporting their produce to the market yard. As many as 37 link roads have been constructed by the Solan marketing committee in the district. Fourteen more link roads are being constructed during the current financial year.

The spokesman said where construction of roads was not possible, ropeways were being laid. (UNI)

Punjab Govt to impose toll taxes

PHAGWARA, Oct 6: The Punjab Government is seriously considering imposing either toll taxes on national and state highways or ‘entry tax’ and ‘exit tax’ in the State, PWD Minister Partap Singh Bajwa has said.

Stating this to mediapersons here yesterday, the minister said these taxes would be collected along the States boundaries and newly constructed bridges.

He further said the State Government would spend Rs 1,000 crore on widening and stregthening of more than 28,000 km of State highway roads. This amount would be spent in phases and 50 per cent would be contributed by HUDCO, he added.

He said the approval of 65 railway over-bridges had been received by the Government and these would be constructed soon. (UNI)

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