Bank of Rajasthan to merge with ICICI Bank

BoR plunged into a crisis early this year after the RBI slapped a Rs25-lakh fine on the bank for alleged violation of various norms

Trouble-torn Bank of Rajasthan (BoR) today announced that it would merge with India's largest private sector lender ICICI Bank, reports PTI.

An agreement for amalgamation was reached today between ICICI Bank and BoR, which as per today's share price is valued at Rs1,500 crore.

BoR shares surged 20% to Rs99.50 following the development.

Bank of Rajasthan said in a notification to the stock exchanges that its controlling shareholders, the Tayal family, "have entered into an agreement on 18 May 2010, with the ICICI Bank for proposing an amalgamation of both."

BoR promoters, the Tayal family had recently run into regulatory trouble with the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) over its stake holding, which had risen contrary to the impression it conveyed.

The Tayal family has about 55% stake and it needs to bring it down to 10% to meet RBI guidelines.

The boards of both the banks met today on the merger.

BoR, one of the oldest private sector banks in the country, plunged into a crisis early this year after the RBI slapped a Rs25-lakh fine on the bank for alleged violation of various norms.

These include irregularities in transactions and misrepresentation of documents, norms pertaining to anti-money laundering, Know Your Customer (KYC) and irregularities in the conduct of accounts of a corporate group.

RBI also appointed Deloitte Haskins and Sells to conduct a special audit of the bank, which recently submitted its interim report to the central bank.

In March, SEBI banned 100 entities including Tayal Group firms from all stock market-related activities for fraudulently hiking the promoter holding in the bank, while conveying the impression that they were reducing their shareholding.

Incepted in 1943, BoR has a network of over 463 branches and a customer-base of over 20 lakh. In the December quarter, the bank's net profit declined to Rs44.7 crore as against Rs49.21 crore in the year-ago period while its total income dropped to Rs373.7 crore from Rs419.8 crore.

ICICI Bank has a network of over 2,000 branches.

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COMMENTS

akshay

6 years ago

its very bed when any out country bank is taking over our countries bank and also RBI aproved for it so it is so chep feeling that stiil wher v r going. better u marge the bank with any indian bank after all indian has some value in international market. so please dont do this type of mareging wher u harting to ur family.
thank you and please dont do this thing.

Govt gives nod to data-collection norms for Unique ID project

The UIDAI proposes to collect data through various agencies of Central and State governments and others who, in normal course of their activities, interact with residents

The government today gave in-principle approval for adoption of standardised approach for collection of demographic and biometric attributes, including iris scan, of residents by various bodies for the Unique Identity (UID) project, reports PTI.

The approval was given at a meeting of the Cabinet Committee on Unique Identification Authority of India related issues (CC-UIDAI), UIDAI chairman Nandan Nilekani said in New Delhi.

To provide unique identity numbers to all residents of India, the UIDAI proposes to collect data through various agencies of Central and State governments and others who, in normal course of their activities, interact with residents.

These entities are described as "Registrars" of the UIDAI.

Explaining the significance of the decision, Mr Nilekani said a final approval will make it essential for any data-collecting department or organisation in the country to adopt the UIDAI standards.

This includes collection of demographic (name, age, sex, age among others) and biometric attributes of residents namely face, all ten fingerprints and iris scan for the UID project.

"It was also decided to include data of the iris for children in the age group of five to 15 years. The same standards and processes would be adhered to by the Registrar General of India for the National Population Register (NPR) exercise and all other Registrars in the UID system," Mr Nilekani said.

He said the biggest partner for the UIDAI was the NPR followed by the rural development ministry through the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

The first set of the 12-digit unique set of numbers will be issued between August 2010 and February 2011. Thereafter, 600 million UID numbers will be issued in the next five years.

Mr Nilekani said talks were also on with the finance ministry, among others, for various projects that could be tied up with UID including issuing of Permanent Account Number (PAN) cards.

Apart from providing identity, the UID will enable better delivery of services and effective governance.

The UID project is primarily aimed at ensuring inclusive growth. It especially seeks to provide UID numbers to the marginalised sections of society.

CC-UIDAI was formed in October 2009 to look into all issues relating to UIDAI including its organisation, plans, policies, programmes, schemes, funding and methodology to be adopted for achieving the objectives of the Authority.
 

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Uncertainty looms large over telecom sector; Bharti, Idea, RCom and Tata Tele down 38%-60% from their 52-week highs

Telecom stocks have taken a beating on the bourses. Over the past 52 weeks, Moneylife’s telecom index fell 43% while shares of Idea, Bharti, Tata Tele and RCom have tumbled 38% to 60% from their highs

Overall uncertainty in the telecom sector—propelled by the tariff war, higher bidding for 3G auction and the telecom regulator's recommendations on 2G spectrum—is affecting share prices of all listed telecom companies. Reflecting the trend, Moneylife’s telecom index has fallen 43.5% to 776.7 from 1,374.32 recorded on 18 May 2009.

On Tuesday, shares of Bharti Airtel, India’s largest telecom operator closed 0.47% up at Rs267.8. Bharti shares are 45% down from their 52-week high of Rs495. Idea shares ended at 0.5%, higher at Rs56.9. Their 52-week high was Rs91.7. RCom and Tata Tele shares closed 2.4% up and 0.5% down at Rs145 and Rs20.5, respectively. The 52-week high for RCom is Rs359 while the same for Tata Tele is Rs41.8. RCom shares are down 59.6%, while Tata Tele shares are down 51.1% from their respective 52-week closing highs.

There are four basic elements that have played a leading role in the lacklustre performance of telecom stocks during the past 52 weeks— the tariff war, 3G auction, Telecom Regulatory Authority of India (TRAI)’s recommendation on 2G spectrum fees and the soon to be introduced mobile number portability (MNP).

It all started with the entry of new mobile service providers (MSPs) such as Tata Docomo, Uninor, MTS and Videocon. Tata Docomo, a joint venture between the Tata Group and NTT Docomo, started its operations with plans like 'pay per call' and 'pay per second'. This move has affected almost all MSPs negatively. Subsequently, they are reporting decline in average revenue per minute (ARPM), average revenue per user (APRU) and minutes of usage (MOU). This tariff plan helped Tata Docomo to attract new subscribers.

This was followed by the auction for 3G spectrum. Initially, everyone was sceptical over the government's estimated revenues of Rs35,000 crore from the bidding for 3G and broadband and wireless access (BWA). However, the bidding surprised everyone, including the MSPs. As of Monday, the 32nd day of the e-auction, the pan-India bid for 3G licence reached Rs16,164 crore, up from the reserve bid price of Rs3,500 crore. With this kind of bidding the government is expected to garner a minimum of Rs65,300 crore as against its estimate of Rs35,000 crore from just the 3G auction. The government can expect to collect another Rs15,000 crore from the BWA auction that will take place soon after the end of the 3G auction.

BRICS Securities Ltd, in a research note said, "Such a price is difficult to justify only on basis of market potential of 3G services in the short to medium-term horizon." However, the current 3G bid level is just about one-third of Bharti Airtel's FY10 revenues. In 2001, 2G licenses for pan-India were issued at Rs1,651 crore and Bharti then had revenues of Rs848.1 crore, or almost half of the licence amount.

"We believe the high price to be paid for 3G license can be justified to some extent given long term potential for 3G services and option value in terms of spectrum usage, infrastructure capital expenditure flexibility, easier migration to 4G for subscribers and competitive intensity in the market," BRICS added.

Given the supply-demand mismatch (for three 3G spectrum slots) and its importance from a long-term growth perspective, analysts expect significant overbidding to take place. Ambit Capital Pvt Ltd, in a research note said, “We expect the auction amount to reach Rs80,000 crore compared with the base price of Rs35,000 crore at a pan-India level. We expect all the leading operators to strive to get 3G spectrum in most of the key circles such as ‘Metro’ and ‘Circle A’ areas. Failing to win 3G spectrum in these areas could place them at a disadvantage versus competing players. As a result, operators will likely end up bidding aggressively, incurring higher cash outflows."

The spiralling bid prices have also put the MSPs under pressure, since the winner would have to pay the entire amount within 10 days from the date of closing of the e-auction. Mobile operators have already secured term loan facilities from banks and financial institutions for 3G funding. “However, in the short term, depending on the bid price, the winning operator may feel some pressure on its earnings,” said Sangeeta Tripathi, research analyst, Sharekhan Ltd.{break}

As if the after-effects of the tariff war and 3G auction were not enough, TRAI came out with new recommendations for 2G spectrum. Raising the quantum of minimum amount of spectrum (contracted amount of 6.2 MHz to the operators), the regulator said: "All the spectrum beyond 6.2 MHz will have to be paid for at the current market price (linked to 3G price) by GSM operators and for the CDMA operators the spectrum assigned beyond the contracted amount of 5 MHz will have to be paid for."

Many analysts believe that the new recommendations from TRAI would be highly negative for most players in the industry. The worst-effected players would be players in the GSM space like Bharti Airtel, Vodafone, BSNL and Idea. However, most new operators would benefit as they would now be entitled to 6.2 MHz of spectrum instead of the earlier contracted 4.4 MHz.

However, certain companies like Tata DoCoMo and Uninor, which are still waiting for start-up spectrum in many circles, would stand out to lose, as they are last in the priority list. They stand little chance of getting start-up 2G airwaves. Here, Tata Docomo may end up a loser.

"We believe the much-awaited recommendations have created more confusion in the industry than it has cleared. We have changed our view to ‘cautious’ on the industry and advise our clients not to take fresh positions in any stocks at this point. We have not revised our estimates. However, according to initial estimates, Bharti and Idea would have to incur a one-time cost of Rs3,345 crore and Rs1,344 crore in terms of spectrum fees. This would result in Rs8.8 and Rs4.1 impact on FY11E EPS for Bharti and Idea, respectively," said ICICI Securities Ltd, in a report.

Analysts expect the constraints on the 2G spectrum connected to the voice services of telecom service providers to ease over the near term due to availability of the 3G spectrum. This will help telecom operators that succeed in the auction to improve the quality of their services, while maintaining strong subscriber volume growth in their existing voice services. “This will affect their business risk profiles positively, by enhancing the retention of high-value customers and improving the players’ competitiveness in an industry where competition has intensified and where churn rates are expected to increase with the implementation of mobile number portability,” ratings agency CRISIL said.

MNP is also expected to lead to higher churning across subscribers. MNP is expected to be rolled out by end-June. Telecom companies who manage to get 3G spectrum would be less susceptible to the MNP impact. However, MNP could pressure financials, as MSPs would need to spend more on quality of service and selling and marketing to attract new subscribers as well as retain existing ones.

The developments over the past 52 weeks have affected the telecom sector in a big way. During this period, Moneylife’s telecom sector index has fallen 43.5% to 776.7. It reached a high of 1,374.32 points on 18 May 2009 and a low of 759.7 points on 13 May 2010. The BSE Sensex, meanwhile, moved up 18% to 16,835.56 points as on 17 May 2010, from 14,284.21 points a year ago.

Despite some negative sentiments, many brokerages have maintained a ‘hold’ or ‘buy’ recommendation on Bharti Airtel and Idea. However, no one is willing to take a call on RCom or Tata Tele.

While MNP implementation and new launches could lead to some further market disruption and cause an increase in competitive activity, successful 3G auctions and final policy on 2G spectrum allocations would increase visibility on these key regulatory issues. One can only wait and watch.

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