Sebi wants 500 violators blacklisted

Capital market regulator Sebi has decided to share with the Ministry of Corporate Affairs the names of about 500 companies that allegedly garnered money from investors in violation of its Collective Investment Scheme (CIS) rules.

Sebi (the Securities and Exchange Board of India) would also give the names of the directors of such entities to the ministry so that necessary action can be taken to prevent these companies and persons from associating with any new company, a senior official says.

The Collective Investment Schemes, where an entity pools in money from investors for certain pre-specified purposes and later distributes the profits or income, come under Sebi’s ambit.

In some recent crackdowns, Sebi had barred companies including Rose Valley Real Estate, Sun-Plant Agro and Pearl Green Forest from raising public money and from launching any new schemes.

Many of these entities and their operators and directors tend to restart similar business under a new name and numerous investors are taken for a ride before they come under the Sebi scanner, the official says.

Sebi has requested the ministry to circulate the names of defaulter CIS entities and their directors among all the Registrars of Companies (RoCs) in the country to prevent them from being associated with any new company. Sebi is also of the view that an overhaul of the current CIS regulations is needed, as loopholes in the existing rules allow investors to be taken for a ride.

Sebi will take up the issue of these regulatory gaps at a meeting of the Financial Stability and Development Council chaired by the Finance Minister. The council includes top financial sector regulators such as the RBI Governor and the Sebi Chairman.

While hundreds of companies have engaged in CIS activities in the country, just one such entity is registered with Sebi to undertake such business. According to Sebi data, more than 100,000 investor complaints are pending with it in connection with such schemes, and the matters have been sub-judice for long in most cases.

While Sebi is the regulatory authority for such schemes, a number of other government agencies and departments also govern similar investment products and a lack of clarity in this regard comes in the way of bringing the guilty to book.

Source: Business Standard

Sebi to come out with IPP guideline

Capital market regulator Sebi has said it would issue guidelines next week for private placement of shares through auction route to institutional investors by promoters.

"IPP (Institutional Placement Programme) guideline would come in next 3-4 days. Work has been done with regard to changes in regulation. Those changes would be done in next 3-4 days," Sebi Chairman U K Sinha said.

IPP would allow promoters to sell up to 10 per cent of their capital through auction to institutional investors.

Opening of this additional route would facilitate the disinvestment programme of the government in current market conditions.

The government is running against time to meet its ambitious disinvestment target of Rs 40,000 crore for the current fiscal.

"This method can be used only for the purpose of complying with minimum public shareholding requirements under Securities Contract Regulation (Rules) or SCRR, either by way of fresh issue of capital or dilution by the promoters through an offer for sale," Sebi had said earlier this month after its board approved a new IPP route.

Using this method, public shareholding can be increased by 10 per cent or lesser percentage as is required to comply with the minimum public shareholding requirement, it had said.

As per government norms, at least 10 per cent of the shareholding in all listed state-owned companies should be with the public, while in the case of private sector companies, the minimum public shareholding should be 25 per cent.

Sebi had said under the IPP mode, companies would be required to simultaneously file a red herring prospectus/prospectus with SEBI, the Registrar of Companies and stock exchanges.

Under the new mechanism, the offer would be restricted to Qualified Institutional Buyers (QIBs), it said. A minimum of 25 per cent of the offer would be reserved for mutual funds and insurance companies.

The company or promoter would announce an indicative floor price or price band at least one day prior to the opening of the offer, it had said.

Issuers shall endeavour to maximise the number of allottees in order to ensure wider distribution of shares, it had said, adding that there shall be at least 10 allottees in every IPP issuance. Furthermore, no single investor shall receive allotment for more than 25 per cent of the offer size.

The regulator also allowed the stock exchange to offer a separate window for the purpose of such sales. The duration of this window would co-exist with the normal trading hours, it had said.

Allotment would be done either on price priority or a clearing price basis proportionately and would be overseen by the exchanges, it added.

Source: Financial Express

Sebi levies Rs 10 lakh fine for fraud

Mumbai: Regulator Sebi has imposed a fine of Rs 10 lakh on Saumil A Bhavnagari of V & S Intermediaries for indulging in fraudulent and unfair trade practices while dealing in the scrip of Adani Exports Ltd.

"After considering all the facts and circumstances of the case... hereby impose a monetary penalty of Rs 10 lakh under Section 15 HA of the SEBI Act on the Noticee (Saumil A Bhavnagari)," the Securities and Exchange Board of India said in an order.

The section deals with penalty for fraudulent and unfair trade practices.

Sebi had earlier conducted investigation regarding the buying, selling and dealing in the shares of Adani Exports Ltd (AEL) between July 9, 2004 and January 14, 2005 and again between August 1, 2005 to September 5, 2005.

The price of the scrip of AEL witnessed wide fluctuations during the two periods.

The role of the main brokers and clients who had traded heavily during the period under investigation in the scrip of AEL was scrutinised.

The investigations had revealed that certain entities transacted in the shares of the company in a fraudulent manner that led to creation of artificial volume and price rise in the scrip.

Bhavnagari and his V&S Intermediaries was one such intermediary.

Sebi had in June 2008 issued a show cause notice to Bhavnagari to which a reply was sent.

After considering all the facts, the regulator said that that the trades made by Bhavnagari were fictitious.

It said the trading pattern of the noticee, by which he created a very large volume in the scrip with select counter-party clients, proves that Bhavnagari had executed trades which did not result in transfer of beneficial ownership but merely created artificial volume in the scrip.

Source: Financial Express

Sebi slaps Rs 60-Lakh fine on senior Jaiprakash Associates executives for 'insider trading'

MUMBAI: Capital market regulator Sebi has pulled up Jaiprakash Associates chairman Manoj Gaur, his wife Urvashi Gaur, brother Sameer Gaur, S D Nailwal, wholetime director of the company, and Harish K Vaid, senior president corporate affairs and company secretary, for alleged insider trading in the company's shares. A total of Rs 60 lakh fine has been imposed on them.

The regulator has alleged that these individuals had taken advantage of their position by trading shares of Jaiprakash Associates while they were in possession of unpublished price sensitive information (UPSI). Sebi had investigated all trades in the stock from September 29, 2008, to October 27, 2008.

But Manoj Gaur in a statement issued late Friday evening denied any wrongdoing. "The findings in the Order are completely erroneous and contrary to factual position. It is unfortunate that despite adequate representation to the Adjudicating Officer, frivolous inferences have been drawn. Aggrieved by the Order, we are in the process of challenging the same before the Securities Appellate Tribunal," said the J P Associates chairman.

Gaur said the Sebi order related to the purchase of 1,000 shares by his wife and 7,400 shares by his brother between October 13 and 16, 2008. These purchases were not based on any insider information and had not even been sold.

According to Sebi, the probe revealed that the company had received the trial balances for the quarter ended September 30, 2008, from its various units in the first week of October 2008. After this the company had announced that its board would meet to consider the unaudited financial result for the quarter, interim dividend and rights issue.

"The consolidated trial balance is the base document from which the financial results of a company would be derived and decision about dividend can be taken. The financial results and dividend declaration are both price sensitive information," Sebi said in its adjudication order.

"The fact that JAL (Jaiprakash Associates) closed its trading window on October 11, 2008, itself proves that UPSI existed from that date," it said. The trading window is closed for directors, specific category of employees and all connected persons in the run up to the announcement of financial results.

The regulator has alleged that Manoj Gaur, who was in possession of unpublished price sensitive information with regard to the company, had communicated the same to his wife Urvashi and brother Sameer, who traded in the stock, thereby making use of certain prior information.

Sebi said that by virtue of their relation with Manoj Gaur, they would fall within the ambit of "person deemed to be connected person" and were in possession of information which were not in public domain.

The regulator has issued a separate order against S D Nailwal who was holding the finance portfolio. According to Sebi, Naliwal was involved in the consolidation of quarterly results at the company level and in the preparation of agenda of proposed interim dividend and rights issue.

The regulator has accused that Nailwal traded in the company scrip during the period when the trading window was closed for promoters and senior employees.

"Noticee (Nailwal) should have complied with the same. The Noticee being the Director, Finance of a large corporate like JAL should have been more vigilant about his dealings. He is also expected to be well aware of the sensitivities of his position and take due care to ensure that there is no infringement of the law in respect of his own dealings," Sebi said. Sebi also accused Harish K Vaid of similar violations.

Source: EconomicTimes

SEBI committee examining e-IPO proposal

Chennai: A committee set up by market regulator SEBI to examine IPO-related issues is looking into a proposal to allow companies to sell shares through electronic Initial Public Offers (e-IPOs).

The proposed move would enable companies to sell shares electronically. Under such a system, investors would bid for shares online and would not be required to sign any papers physically.

"The committee set up by SEBI to undertake various issues relating to IPOs is looking into it (the e-IPO proposal). We are awaiting formal clearance from the Ministry of Corporate Affairs for the e-IPO process," SEBI Chairman U K Sinha said.

Asked about SEBI's proposal for reducing the number of days in the IPO process, he said, "The current period of 12-plus days and how to reduce it is part of the committee's mandate."

Calling for more awareness among the public on financial markets, he said an international conference is proposed to be held in Goa in February as part of investor education initiatives.

A SEBI official said the conference will be co-hosted by SEBI and the Organisation for Economic Cooperation and Development (OECD).

The conference will explore domestic issues related to investor education as well as international issues and global trends, with special focus on Asia and its investor education needs, he said.

Source: Financial Express

Sebi cracks down further on IPOs fraud

Capital market regulator Sebi is reviewing the process for initial public offerings (IPOs), its chairman said on Thursday, a day after it banned seven small companies from fund-raising for what it said were IPO rule violations.

We are currently reviewing the entire IPO process, including shortening the timeline for the entire process, U.K. Sinha said.

The Securities and Exchange Board of India (Sebi) said on Wednesday a probe revealed a fraud in IPOs, inadequate documentation and due diligence and possible trading violations on the day of listing.

The IPOs were launched between July and November and had raised about 4.5 billion rupees ($84 million).

It also banned the directors of the seven companies from dealing in the securities market and told some of the merchant bankers they would not be able to handle new capital issues until further notice.

We are happy that Sebi has taken such a bold step, which is an unprecedented action, Sageraj Bariya, managing partner of research house Equitorials, wrote in a note. Sebi might be slightly late but it is definitely better than never.

Shares in the companies -- PG Electroplast, Brooks Laboratories, RDB Rasayans, Taksheel Solutions, Tijaria Polypipes, Onelife Capital Advisors and Bharatiya Global Infomedia -- fell 5-17 percent on Thursday in a Mumbai market that was down 1 percent.

Some of the companies could not be reached for comment, while others did not return calls.

Five of the companies have lost 90 percent or more of their value from their peaks, while PG Electroplast is down 70 percent and OneLife Capital has lost about a third.

The companies and merchant bankers have 21 days to respond to the Sebi order.

MERCHANT BANKS UNDER SCANNER

We will be representing our case to the regulator ... within the time that has been specified, Sanjay Dewan, associate director at Almondz Global, told Reuters over the telephone from Delhi.

The merchant banker, along with PNB Investments, the investment banking arm of state-run Punjab National Bank , D&A Financial, Artherstone Capital, Chartered Capital and Onelife Capital Advisors have been barred from taking new assignments, Sebi said.

Officials at PNB Investments and Onelife Capital were not available for comment, while calls to the other merchant bankers were unanswered.

Sebi, over the last 6-9 months, has been highlighting to the merchant banking community that you have to do very serious due diligence, Sinha told the news channel.

We are trying to hold them responsible ... and I hope by this method a pressure will be built on future issuers, he said. ($1 = 53.3 rupees)

Source: Financial Express

SEBI to launch toll-free investor helpline

Chennai: Market regulator SEBI would launch a toll-free helpline as part of educating investors on the securities market, Chairman U K Sinha a said today.

With the launch of helpline, an investor can ask any question regarding the securities market which will be answered. "The reason why we are launching is that we have identified that self-help mechanism could be more useful for investor," Sinha told reporters.

Besides, SEBI would launch in association with the Central Board of Secondary Education a course curriculum on financial markets at the secondary school level as part of educating the younger generation (about the financial market).

"We are trying to make all the students aware about the basics of financial market. (Before launching), the curriculum will be tested. It will be built in to the senior secondary curriculum to begin with..", he said on the sidelines of a conference.

Asked why it has been launched through the CBSE mode than targeting the State government run schools, he said once this experiment was successful, it would be expanded into other areas.

Source: Financial Express

Sebi wants listed cos to be ethical

New Delhi: Rejecting the idea of assuming a CVC-like role of anti-corruption watchdog for the private sector, capital market regulator Sebi has said it wants listed entities to follow a nine-point disclosure norm against non-ethical business practices instead.

The Securities and Exchange Board of India (Sebi), which regulates thousands of listed companies as well as hundreds of other market entities like brokers, merchant banks and ratings agencies, has informed its board that it cannot adopt aprivate sector role similar to that of the Central Vigilance Commission (CVC) for government entities.

In a memorandum submitted to its board at its last meeting on November 24, Sebi said a CVC-like role "is not within the mandate of Sebi under the existing legal framework".

At the same board meeting, Sebi approved a new disclosure-based regime for listed companies with respect to non-ethical business practices.

As per the decision, companies would need to submit a 'Business Responsibility Report', along with their annual reports, to help assess the fulfillment of their environmental, social and the corporate governance responsibilities.

These disclosures, which Sebi has proposed to be based on nine key principles of responsible, transparent and ethical business practices, would initially apply to the top 100 companies.

Regarding the adoption of a CVC-like role in respect of activities of private sector companies, Sebi said its jurisdiction extends to listed companies in the private sector on certain matters delegated under the Companies Act.

“Further, Sebi has been established to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market as enshrined in the Sebi Act," the regulator told its board.

The matter came up for discussion in the backdrop of a proposal to Sebi by Transparency International, a global civil society organisation working against corruption, for exploring the possibility of Sebi performing a CVC-like role with respect to the activities of private companies.

The CVC was set up by the government with a mandate to inquire into offences alleged to have been committed under the Prevention of Corruption Act by certain categories of central government employees, corporations established by or under any Central Act, government companies and other entities owned and controlled by the central government.

Sebi said that Transparency International India (TII) was also working toward eradication of corruption by "bringing together relevant players from government, civil society, business and the media to promote transparency in elections, in public administration, in procurement and in business."

In a letter sent to Sebi in July, inviting the regulator to participate in a Conference on Ethics in Business, TII had suggested exploring the possibility of Sebi performing a role similar to the CVC with regard to the activities of private sector firms.

Sebi participated in the conference, held in August.

Sebi said the conference was focused on the performance of Integrity Pacts (IP), a tool developed by TII for preventing corruption in public contracting.

An IP is an agreement between a government agency and all the bidders for a public contract and lays down each parties' rights and obligations for prevention of bribery and other corrupt practices.

This tool also introduces a monitoring system with the approval of the CVC that provides for independent oversight and accountability.

Sebi told its board that it was also informed by the TII representatives about their initiatives for extending the principles of business ethics and adoption of IP by corporates in private sector in their business dealings.

Sebi also noted that the "CVC has issued various circulars emphasising the necessity of adopting IP in government organisations in their major procurement activities."

However, in view of the limited procurement activities of public sector banks, insurance companies and financial institutions, these organisations were exempted from the Ips.

Noting that Sebi, being a government organisation, was covered under the said circulars of the CVC, the board was told "... the fact remains that Sebi has only very limited procurement activities."

On the Business Responsibility Report, Sebi told its board that companies were "accountable not merely to their shareholders from a revenue and profitability perspective, but also to the larger society, which is also its stakeholder."

“Hence, adoption of responsible business practices in the interest of the social set-up and the environment are as vital as their financial and operational performance.

"This is all the more relevant for listed entities, which, considering the fact that they have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive continuous disclosures on a regular basis," the board was informed.

The nine key principles proposed for the new disclosures include the companies' conduct and governance being based on ethics, transparency and accountability, promotion of the well-being of all employees, respect toward human rights and environmental issues, among others.

They also call for businesses to act responsibly when engaged in influencing public and regulatory policy.

Source: Financial Express

RBI, SEBI looking into Satyam auditors' lapses

NEW DELHI: The Government today said that accounting regulator ICAI has examined the alleged role of auditors in the Satyam scam and RBI and SEBI are looking into the issue.

Minister for Corporate Affairs Veerappa Moily, referring to the multi-crore scam in Satyam Computer Services, said the Institute of Chartered Accountants of India (ICAI) and the Ministry have examined the matter. The issue is before regulators - RBI and SEBI.

"RBI has been advised to take action against violators," Moily said, replying to a brief debate on three bills seeking to amend laws governing the professions of chartered accounts, cost and works accountants and company secretaries.

In both Satyam and Global Trust Bank cases, action against auditors, including PricewaterhouseCooper were delayed due to many court proceedings.

"There are a number of court cases. We will seriously see. In Satyam case maximum punishment was given to the CA," he said.

A massive accounting fraud in IT company Satyam Computer came to light in January 2009 after its founder B Ramalinga Raju admitted to fudging accounts for many years.

On members' concern that global audit firms come to India masquerading as consulting firms and set up surrogate companies violating law, Moily said the issue is being examined seriously.

"It is right. MNCs come as management consultants and start doing as surrogate firms...we will address the issue seriously," he said.

Source: EconomicTimes

Sebi seeks regulator to monitor auditors

NEW DELHI | MUMBAI: Market regulator Sebi has called for the creation of an independent regulator to oversee auditors, a move that is being opposed by the Institute of Chartered Accountants of India (ICAI), the industry body that self-regulates the auditing profession at present.

"We have taken up the issue with the finance ministry and asked for an independent regulator for the profession," a senior Sebi official told ET. The market regulator has told the finance ministry that lack of a strong regulatory framework for auditors compromises the efficient functioning of stock markets. Another Sebi official said there was a conflict of interest in the multiple roles being performed by ICAI, from being an industry body for the country's 1.6 lakh practising chartered accountants to being a regulator for the entire profession.

The institute has faced charges of not taking timely action against those guilty of misconduct, particularly in the Global Trust Bank and Satyam scams. Auditors vet the financial statements of their clients and play a vital role in ensuring that companies do not fudge their books or provide incorrect financial information to their investors. The International Organization of Securities Commissions, or IOSCO, an association of bodies that regulate the world's securities and futures markets, had formulated eight new principles in June 2010 to ensure that systemic risks were reduced and markets functioned fairly, efficiently and transparently.

One of the key principles was that 'auditors should be subject to adequate levels of oversight by an authority that is independent of the audit profession'. "We want to ensure that we do not fall short on meeting any IOSCO requirement," said the Sebi official quoted above. India's market regulator is a member of IOSCO, and its independent assessment found ICAI falling short on the oversight front. But ICAI President G Ramaswami dismissed the need for an independent regulator.

Sebi wants oversight mechanism quickly

"Independent regulator is not required at all... The institute is doing a commendable job and everything is transparent. Just because of a few scams, one shouldn't question the credibility of the institute," he said. The head of one of the country's leading accounting firms, who did not wish to be named, was guarded in his reaction to Sebi's proposal. "We need to see this proposal in the backdrop of the performance and role of other regulators. The records of some other regulators has been rather indifferent," he said.

The finance ministry says a provision for some sort of regulatory oversight is already proposed in the Companies Bill. A ministry official said the new Companies Bill to be tabled in Parliament soon could provide for an oversight mechanism for auditors and address the concerns of the market regulator. But Sebi wants an oversight mechanism created quickly in line with the requirements posed by the new global rules, and wants an independent regulator for the accounting profession. Experts back its demand.

"While India has better accounting standards than many countries, there is a need to improve the reporting and enforcements of auditing norms," said Shriram Subramanian, managing director, InGovern Research Services, a proxy advisory firm that tells institutional shareholders how they should vote on specific resolutions.

Source: EconomicTimes

BoB to raise Rs 775 cr thru preferential issue

Bank of Baroda is looking to raise Rs 775 crore through a preferential issue of equity shares or convertible warrants before March-end 2012, the bank said in a notice to the BSE, on Friday.

This capital infusion will increase the Government's stake in the bank to 58 per cent from 57 per cent.

Last year, the Government infused about Rs 2,600 crore in BoB, which increased the former's stake in the bank to 57 per cent.

The share price for the issue would be based on the last six months average price, which is as per the SEBI formula.

Sebi to revamp IPO process to check price manipulation

Market regulator Sebi today said it is looking at revamping the initial public offering (IPO) norms and putting in place a common KYC regulation for financial sector intermediaries.

"Whenever we find instances of violation (IPO norms), we will take deterrent action. It also calls for a relook at our entire IPO process. So we are doing that as well," Sebi Chairman UK Sinha told reporters on the sidelines of an ANMI event here.

He said very soon a regulation for centralised KYC (Know Your Customer) would be put into place for making the process easy. "We have decided to have a thorough review of our risk management system as the current system is more than 10 years old," Sinha said.

Earlier this year, the Securities and Exchange Board of India (Sebi) had decided to introduce a new short and simple form for IPO investors for increasing retail participation in the stock markets.

In the first half of the current fiscal, 30 companies have raised fund totalling over Rs 5,000 crore through IPOs.

Sources in the know of the move say that the market regulator is considering expediting the clearance of IPO offer documents. Companies have a one-year time to come out with public offers from the date of Sebi clearance.

Sinha further said that Sebi takes quick, effective and non-discriminatory action in case of market manipulation.

Speaking on the occasion, NSE Chairman and MD Ravi Narain said, "We want to have more products. But we are not interested in speculative products. However, any product which manage volatility and eliminate systems risk are welcome."

Sinha said the cost of trading has gone up in the country and that Sebi has taken up the issue with the government.

"It is now time for having a re-look at the Securities Transaction Tax (STT). Sebi has taken it up with government," he said.

The government had introduced STT in 2004 on transactions in different types of securities. The rate presently varies from 0.025% to 0.25% depending upon the type of security traded and transaction ? whether sale or purchase.

Sinha further supported the call for bringing the investments of EPFO and retirement fund to the stock market.

"I would recommend that we engage the labour leader and the trustees of such fund to tell them how the market functions," he said.

Echoing similar view, Narain said, "We should look at new pension scheme (NPS) and Employee Provident Fund to increase participation in the markets."

Source: Business Standard

Bajaj Finserv gets SEBI approval for mutual fund business

MUMBAI: Bajaj FinServ, the financial services arm of Bajaj Group, has received approval from the capital markets regulator Sebi for setting up mutual fund business and is likely to enter the fray by end-2012, a top official said today.

"We have received the Sebi approval and are evaluating the right business model," the company's Managing Director Sanjiv Bajaj told reporters on the sidelines of the India Economic Summit of the World Economic Forum here.

He, however, said the company's consumer lending business may be hit going forward.

"Going ahead, it(consumer lending) will slow down. Consumer lending is the last one to be affected in a high rates cycle and I see some impact on the vertical," Bajaj said.

Bajaj FinServ's business plans continue to be "steady" even as fears of a slowdown are being expressed, he said.

"The market is large enough for us to find our attractive business," he said adding that a lot remains to be done on the inflation front.

Bajaj Finserv posted a more than two times rise in its net profit at Rs 158 crore in the second quarter of current fiscal on the back of sound rise in income in its general, and life insurance business among others.

Net profit during the July-September period of the company was at Rs 69 crore.

Total income during this period rose by 52 per cent to Rs 714 crore compared to Rs 471 crore reported an year ago period.

Source: EconomicTimes

SBI captial infusion: Govt may opt for warrants due to price lock and deferred payment

NEW DELHI: The government may opt for warrants issue to infuse capital into the State Bank of India, helping it lock into the current low stock price and leverage its existing resources.

The finance ministry aims to provide Rs 10,000 crore to the bank this year, of which Rs 2,900 crore could be given immediately from the resources set aside in the budget.

"Differential voting rights is out of question and rights issue will require immediate allotment of funds which the government is not in a position to allocate," a finance ministry official told ET, indicating preference for warrants.

SBI has demanded urgent decision on its plan to raise capital after its tier-I capital dropped to 7.6%, below the mandatory 8%.

The SBI had earlier indicated it will require Rs 20,000 crore over the next two fiscal years and proposed a rights issue that would have required the government to infuse about Rs 12,000 crore if it needed to retain its stake in the bank at 59%. The cash-strapped government has found it difficult to spare such funds.

Warrants are derivatives in the nature of options that give the buyer the right to purchase shares in a company at a pre-decided price within a certain period, 18 months in the case of listed companies in India.

According to Sebi rules, shares have to be priced at higher of the average of the weekly high and low of the closing prices during the six months preceding the issue date or the same average during the two weeks preceding the issue date.

SBI's share price has been in the range of Rs 1,715 to Rs 2,675 in the last six months.

Only 25% of the price at which underlying shares are priced in the warrants issue has to be paid, allowing the buyer to benefit from a possible rise in share price.

The warrant proceeds are considered as equity as they are adjusted against the final price if the buy option is exercised.

"If the acquisition price is finalised by the government now, it will allow the government to infuse around 30% now and the rest later at a lower cost if the share price of SBI rises," said Jagannadham Thunuguntla, strategist & head of research at SMC Global Securities.

Issuing warrants will allow the government to lock into the lower prices, but the actual capital infusion is likely to happen over the next 18 months.

Depending upon the success with SBI, the same model may be followed in case of other state-run banks.

The Planning Commission has already approved the Rs 14,000-crore demand of the finance ministry for capital infusion in 21 state-run banks. The government is expected to finalise the amount for each bank by the end of this month.

"We have already approved Rs 2,900 crore for SBI from last budget. The rest will be given during this financial year to fully capitalize SBI," the official said.

Another finance ministry official confirmed that the government is also exploring the option of a World Bank loan but negotiations have not started yet.

"We were allocated $3.2 billion last year, but had taken only $ 2billion. So, there is a scope but it's too early to say," he said.

The government expects the capital adequacy concern of SBI to be mitigated this quarter because of the extra provisioning by the bank in the earlier two quarters.

Source: EconomicTimes

IRDA, SEBI finalise IPO norms for life insurers, to be notified soon

Hyderabad, Nov 8:The much-awaited norms for the initial public offerings of life insurance companies are finally ready.

"The guidelines framed by us are also approved by the Securities and Exchange Board of India. They will be notified in the Gazette by the Government within days,’’ Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority, told newspersons here on Tuesday.

The insurance regulator has finalised the norms last year which were sent to the market regulator for its approval.

On the proposed changes in the Motor Third Party pool in the general insurance segment, Mr Hari Narayan said a decision would be taken on the nature and size of pool in view of the balance between demand and supply.

The concept of motor pool was originally conceived when there was demand-supply mismatch.

Mobile, Internet, e-banking - the way to go

In tune with the times, the Thiruvananthapuram-headquartered State Bank of Travancore is setting great store by mobile and Internet-based banking as well as harnessing the e-platform to executing Government business.

Mr P. Nanda Kumaran, who has taken over Managing Director in recent times, says that the mobile banking services are steadily gaining traction and monthly registrations have touched ‘the five-digit mark' over the last three months, compared to the sub-1,000 levels a month earlier.

More importantly, the value of mobile-based transactions has crossed the Rs 1-crore mark a month during this period.

“We expect Internet banking and mobile banking to grow in a big way in the coming months,” he said in an interview.

“One other real success story has been the e-payment of commercial taxes in Kerala, wherein we are seeing around 60,000 Internet transactions worth Rs 900 to Rs 1,000 crore every month.”

The bank has 900 ATMs of our own, which are part of the 25,000-plus State Bank Group network, touching every nook and corner of the country. ATM transactions are growing at around 18 per cent every year at over Rs 1,500 crore worth of transactions every month.

“Going forward, we expect over half of all transactions would be through self-service channels such as ATM, Internet and mobile banking,” Mr Nanda Kumaran adds.

Excerpts:

Could you spell out a road map for the bank which had broken into the Rs 1 lakh-crore territory in December 2010 itself?

The bank is continuing with the steady growth trend in business, with the total turnover touching Rs 1.1 lakh crore at the end of the latest half year.

As the processes in regard to consummating a Rights issue are already apace, it may not be proper to give a forward guidance at this stage, according to the guidelines of Securities and Exchange Board of India (Sebi).

Public sector banks are looking at new opportunities in areas such as financial inclusion, mobile banking and rural banking. What is the outlook for SBT with respect to each?

We have already fulfilled our financial inclusion target by extending banking services to all our allotted villages in Kerala with one branch having been opened in one of the 29 such villages and Business Correspondent/Business Facilitator (BC/BF) services being rolled out in the remaining 28.

Our mobile banking services are steadily picking traction and monthly registrations are touching the five-digit mark over the last three months, compared to the sub-1,000 levels a month earlier.

More importantly, the value of mobile-based transactions crossed the Rs 1-crore mark a month during this period.

We expect Internet banking and mobile banking to grow in a big way in the coming months.

One real success story has been the e-payment of commercial taxes in Kerala, wherein we are seeing around 60,000 Internet transactions worth Rs 900 to Rs 1,000 crore every month.

Innovative new products and services would be a key differential that would separate nimble-footed and result-oriented banks from laggards. How is SBT measuring up?

SBT has always been in the forefront of bringing in innovative and consumer-friendly products to meet the needs of all segments of customers.

It would not be possible to name all of them. Latest initiatives such as selling gold coins and SBT Gold savings scheme are among such in the large array of our products.

I believe our responsiveness and customer-friendly approach will continue to be the key service differentiator.

Have you been able to reach these products to the customers? What has been the overall response to each?

Definitely. The steady growth achieved over the years is sufficient testimony to the attractiveness and acceptability of our products.

Our extensive network of over 600 branches in Kerala and about 200 outside help us to reach out to a variety of customers and cater to their needs.

What steps does SBT contemplate with regard to emerging challenges on the business environment, especially in IT security and risk management?

SBT has always been in the forefront of implementing technology and modern risk management initiatives.

It was among the first pubic sector banks to implement total computerisation of branches in year 2003 and thereafter migrate fully to a core banking system in 2005.

We also migrated to the Basle II framework, ahead of schedule in March 2008 itself.

I am confident that our bank will not be found wanting in being able to cope with the emerging challenges of Basle III and IFRS etc.

How successful has been SBT's efforts at finding the right mix of assisted and self-service channels aimed at providing the best banking experience to customers?

We have 900 ATMs of our own, which are part of the 25,000-plus State Bank Group network, touching every nook and corner of the country.

ATM transactions are growing at around 18 per cent every year at over Rs 1,500 crore worth of transactions every month. As stated earlier, both Internet and mobile banking transactions are growing even faster now.

Going forward, we expect over half of all transactions would be through self-service channels such as ATM, Internet and mobile banking.

Does SBT intend to further broadbase engagement in three different areas of business enterprise which it has strongly involved in, namely (i) road transport operators (ii) cross-selling and (iii) Government business?

We have a significant portfolio in road transport companies/automobile finance, with tie-ups with all major players for financing customers.

We are corporate agents for SBI Life and Mutual Funds, five other mutual funds, United India Insurance and SBI Cards.

Our income from such cross-selling activities has been steadily growing up every year.

In terms of Government business, we are of course Bankers to the Government of Kerala and a majority of Government transactions are routed through us.

We expect to maintain our dominant position in Government business in Kerala in the years to come, with active support of the Government authorities.

During the next half of the financial year, what will be the bank's strategy on lending to (i) agriculture (ii) SME and MSMEs and (iii) retail loans – housing, car and personal?

As already indicated, I preclude myself from making any forward-looking statements at this point in time. Replies on these areas will have to await another day.

Is there a fresh line of thinking on combating the industry trend of deteriorating asset quality? Would you look at a dedicated mechanism to deal with NPAs?

NPAs are part and parcel of banking business. Exercising effective supervision and control over advances is part of our DNA.

We face greater challenge compared to other banks due to the sheer numbers of our retail portfolio.

One of the new initiatives that we have rolled out is the Asset Tracking Centres (ATCs) where we have a technology that enables outbound calls by our personnel to engage with our borrowers over telephone at their landline/mobile numbers and persuade them to remit their dues in time.

This is beginning to have an impact on improving our recoveries painlessly.

Would you have a new look at the gold loan category, especially after an RBI directive on loans sanctioned to NBFCs for on-lending not eligible for classification under priority lending?

We have traditionally been an active player in gold loans, though volumes have been lower compared to the current times. Our gold loan portfolio is growing at a steady clip now.

We have plans to open exclusive gold loan branches at all district headquarters in Kerala shortly. We expect to carve out a greater share of this segment in the coming months.

We do not have had a sizable exposure to on-lending to NBFCs' gold loans. Hence the RBI directive has had limited impact on us.

Sebi to probe high volatility in IPOs

To look at the possibility of manipulation by some players after listing.

The high fluctuation in share prices of a number of companies on the listing day has caught the attention of the Securities and Exchange Board of India (Sebi).

Sebi had initiated an enquiry into possible price manipulation in the stock price of some of the recently-listed companies, senior officials said. Sebi is looking into the subscription and trading details of these stocks.

“An enquiry has been initiated. The idea is to find out if there is a trend of systematic manipulation by a set of players in the stock price,” confirmed the official.

Senior officials said the market regulator would look into the subscription details and trading pattern. The subscription details would help it get cues about the names of investors who subscribed to these issues. If the same people had applied in most issues, there could be a trend.

Similarly, looking into the trading pattern would indicate if there was a concentration of volumes from a particular segment of brokers. The trading volumes in newly-listed companies were several times higher than the number of shares issued by companies in IPOs, indicating that there could also have been some circular trading in them.

Market experts say the modus operandi of IPO operators is similar to that used by now infamous trader Nirmal Kotecha, who rigged the share price of Pyramid Saimira through several benami accounts registered in the name of many individuals, including domestic helps and office boys.

Importantly, many of these stocks have seen little or negligible subscription from institutions. Yet, they were subscribed several times on the back of high subscriptions by retail and high net worth investors.

The reason, market players say, is that there are some dummy applicants who subscribe to an IPO for a small fee. There are allegations that many promoters pre-sell their issues at a 30-50 per cent discount to operators in Gujarat and Mumbai to get subscriptions. And, once the stock is listed, operators scramble to exit. This leads to wild fluctuations in the prices of these stocks.

The regulator is disturbed by this IPO trend, as high operator activity could hurt the genuine investors in these stocks. Also, regulating the IPO grey market has emerged as a serious challenge for Sebi.

Market players said there were some operators, nicknamed Barter and Rangeela Raju from Gujarat, and some Sebi-banned traders in Mumbai, who were active in the business of dummy investing.

The 2010-11 financial year has not been very good for small investors, as the stock prices of more than 70 per cent of companies that went for IPOs fell below their issue prices in the first few weeks of listing.

Among the recent IPOs, RDB Rasayana, Bharatiya Global, Servalakshmi Paper, Brooks Laboratory, Tijaria Poly Pipes and Sanghvi Forging & Engineering, among others, fell 70-80 per cent on either the day of listing or in two-three trading sessions after it.

The share price of RDB Rasayana was down 73 per cent on October 7, the listing day, and crashed to a low of Rs 14 on BSE from the issue price of Rs 79. All these IPOs were small, of Rs 30-80-crore size. Some, like Shekhawati Poly-Yarn and Omkar Speciality, are already under Sebi scanner.

RDB Rasayana saw retail subscriptions of 3.82 times. Similarly, Brooks Laboratories and Sanghvi Forging & Engineering saw subscription of 3.70 times and 2.88 times, respectively, from retail investors.

Stocks like Innoventive Industries, Paramount Printpack, VMS Industries, SRS Ltd, Timbhore and Readymade Steel fell 30-60 per cent from IPO prices. The key benchmark indices, including Sensex, Nifty and BSE small- and mid-cap, are down 15 per cent this year.

Source: Business Standard

Sahara told to refund investors' money

Rejecting the appeals of Sahara Group companies, the Securities Appellate Tribunal (SAT) today asked them to refund the money raised through Optionally Fully Convertible Debentures (OFCD) to investors within six weeks.

"...both the appeals are dismissed...The appellants in both the appeals shall now repay within six weeks from today the amount collected from investors on the terms as set out by the whole time members (of Sebi) in the impugned order," SAT said in its order.

While dismissing the appeal filed by Sahara Group companies against the Sebi order, it held that the market regulator has jurisdiction over such fund raising schemes.

"...we may mention that in view of our findings that OFCDs issued by the company are securities and that the issue was a public issue requiring mandatory listing and that Sebi has the jurisdiction under the Sebi Act to deal with all kinds of securities and companies, whether listed or not...", the order said.

It could not be immediately ascertained how much money the Sahara companies would have to refund to investors who had parked their funds as OFCDs.

SAT has given the two companies -- Sahara India Real Estate Corporation (now known as Sahara Commodity Services Corporation Ltd) and the Sahara Housing Investment Corporation -- six weeks to return the money.

The Securities and Exchange Board of India (Sebi) had in June asked the two Sahara group entities to return money collected from millions of investors through a financial instrument OFCD citing violation of regulatory norms.

The Sahara Group had challenged the Sebi order in SAT. It contended that Sebi has no jurisdiction over the issue as the companies involved were not listed. It maintained that entities involved were privately held companies and were under the jurisdiction of the Ministry fo Corporate Affairs (MCA).

A similar issue was raised by Sahara in the Supreme Court which had asked it to approach the SAT in the matter.

Dismissing the contention of Sahara which was represented by senior advocate Fali S Nariman, the SAT order said: "This argument has no merit... A plain reading of Regulation... leaves no room for doubt that the regulations apply to all public issues."

Sebi had earlier in June had asked the two companies to refund the money raised from hybrid instrument OFCD to investors along with 15 per cent interest.

The two companies and its promoter Subrata Roy Sahara, and the directors -- Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary-- jointly and severally were told to refund the money collected.

Besides, the regulator had also restrained the entities from accessing the securities market for raising funds, till the time payments are made to the satisfaction of the Sebi.

Although the total amount raised by the two companies is not known, the Sahara companies have been raising money since 2008. The companies have been collecting money through different schemes from investors which has been estimated at several millions.

The companies had failed to apply for and obtain listing permission from recognised stock exchanges, Sebi had said in its earlier order.

Source: Financial Express