Bhatt defends teaser rates; to take a call late next month

Mumbai: The country's largest lender State Bank of India (SBI) today said teaser rate home loans are the "best product and the most sought-after" in the market today, a comment that comes on the heels of RBI expressing concerns over such offerings, reports PTI.

"This is the best home loan product... in terms of affordability, in terms of friskiness, this is the best product we have in the market today," SBI chairman Om Prakash Bhatt told reporters on the sidelines of a banking event organised by the Indian Merchants Chamber here.

Refusing to term this cheaper loan as teaser rate as a special product, Mr Bhatt further said that the product offers the best and the most affordable payment option to a borrower.

He said the product would remain in force so long as it remains relevant and commercially viable to the market.

Under the teaser rates home loan scheme, banks lend at lower rates in the first few years which are subsequently raised.

As late as the last monetary policy review and the half-yearly macroeconomic report, the apex bank had raised concerns over the teaser rates. But even at the customary post-policy press meet, Mr Bhatt had insisted that this special loan scheme was the need of the hour.

According to bankers, its a win-win product as in an easy liquidity scenario and serious credit crunch (when the product was first launched being goaded by the government in the wake of the global financial crisis) it fetches them higher interest rates while for the borrower, it gives cheaper money and helps in repayment as his incomes increase as the years go by.

In the second quarterly review of the credit policy on 2nd November, the RBI sounded concerns over building up of asset bubbles in the realty sector as a result of excessive borrowing and increased the mandatory provisioning for teaser loans by five times to 2%.

RBI governor Duvvuri Subbarao had said on the policy day that "the real estate prices have reached or even surpassed pre-crisis levels."

Downplaying fears of asset bubbles, he said, "We thought that we must rein in loose practices in most of the housing sector."

Speaking to reporters today, Mr Bhatt said that as per the practice, SBI will take a call on whether to continue with the teaser rates scheme or not by the end of the current quarter (end December).

Conceding that the liquidity situation is different now from 2009 when the product was first launched, Mr Bhatt added, "The situation has changed (from when the teaser schemes were launched) but it has not changed so as to warrant that this is an unwanted, or an unprofitable or a risky product. It is a very much a desired product by the people and very risk free."

To a pointed question on whether the bank will discontinue this loan scheme from the next quarter, he refused to give a straight answer and said, "It will remain in force so long as this remains relevant and commercially viable."

All the major lenders, including SBI, mortgage lender HDFC and Indiabulls, among others currently offer teaser home loan rates.


Personal finance Friday

JPMorgan MF unveils JPMorgan India Capital Protection Oriented Fund; Pramerica MF to float two schemes; Sundaram MF declares dividend under Sundaram Select Mid Cap Fund; Principal MF files offer document with SEBI to launch Principal Pnb Fixed Maturity Plan-91 Days-Series XXVIII

JPMorgan MF unveils JPMorgan India Capital Protection Oriented Fund

JPMorgan Mutual Fund has launched JPMorgan India Capital Protection Oriented Fund, a close-ended income scheme.

The scheme seeks to generate returns and reduce interest rate volatility, through a portfolio of fixed-income securities that are maturing on or before the maturity of the scheme along with capital appreciation through equity exposure. The scheme is oriented towards protection of capital.

The tenor of the scheme is 39 months. The scheme offers growth and dividend (payout) option. The exit load for the scheme is nil.

During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 12th November and closes on 26th November.
The minimum investment amount is Rs5,000. The minimum target amount is Rs1 crore.

The benchmark indexes for the scheme are 15% BSE 200 + 85% CRISIL Short Term Bond Fund Index. The scheme shall be managed by Nandkumar Surti and Namdev Chougule.

Pramerica MF to float two schemes

Pramerica Mutual Fund has launched two schemes-Pramerica Equity Fund and Pramerica Dynamic Fund.

Pramerica Equity Fund seeks to achieve long term capital appreciation by investing in an actively managed diversified portfolio consisting of equity and equity-related securities including derivatives, debt and money market instruments.
Pramerica Dynamic Fund is a dynamic asset scheme, powered by Pramerica DART (Pramerica Dynamic Asset Rebalancing Tool), a proprietary tool developed by Pramerica Mutual Fund to measure the relative attractiveness of different asset classes and suggest an optimum asset allocation mix between debt and equity.

The schemes will open for subscription on 19th November and will close on 3rd December. The schemes will be opened for ongoing sales and repurchase from 13th December.

The schemes will be managed by Ravi Gopalakrishnan and Mahendra Jajoo.

Sundaram MF declares dividend under Sundaram Select Mid Cap Fund

Sundaram Mutual Fund has announced 12th November as the record date for the declaration of dividend on the face value of Rs10 per unit under the dividend option of Sundaram Select Mid Cap Fund.

On the record date under the scheme, Rs 2 per unit (20%) shall be declared as dividend.

Sundaram Select Mid Cap Fund is an open-ended equity scheme which seeks capital appreciation by investing in diversified stocks that are generally termed as mid caps.

Principal MF files offer document with SEBI to launch Principal Pnb Fixed Maturity Plan-91 Days-Series XXVIII

Principal Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch Principal Pnb Fixed Maturity Plan-91 Days-Series XXVIII. The scheme will be a close-ended debt scheme.

The investment objective of the scheme is to build an income oriented portfolio and generate returns through investment in debt/money-market instruments and government securities.

The scheme will invest in debt/money market and government securities maturing on or before the date of the maturity of the scheme.

The scheme will have growth and dividend options. The exit load for the scheme is nil. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The minimum application amount will be Rs5,000. The minimum target amount is Rs35 crore. The benchmark index for the scheme would be CRISIL Liquid Fund Index.


Ranbaxy to explore less-saturated global markets to drive growth

Speedy resolution of the cases pending with US regulatory authorities, maximising synergies with its parent Daiichi Sankyo and improving geographical market spread will be the key growth drivers for the pharmaceutical major

Driven by a surge in sales in the US market, Ranbaxy, the country's largest drug maker, reported an over two-fold jump in its net profit to Rs312.80 crore for the quarter ended 30th September from Rs116.60 crore in the same period last fiscal. The company also benefited from favourable forex movement in the third quarter.

The Gurgaon-based company's total operating income rose to Rs1,934.60 crore for the third quarter, as against Rs1,885.8 crore in the corresponding period previous fiscal.

During the July-September quarter, company posted sales of Rs491.20 crore in the North American region, an increase of over 70%, on the back of robust sales of Valacyclovir, which continued to enjoy a healthy market share of 36%, even after losing exclusivity for the drug. Valacyclovir, an anti-herpes drug, was a first-to-file (exclusive marketing rights for 180 days) product of the company in the USA.

The company's domestic sales stood at Rs493 crore for the third quarter, while CIS region's sales stood at Rs120.90 crore.

The company's Africa sales stood at Rs164.40 crore for the third quarter. The company's active pharmaceutical ingredient (API) business posted sales of Rs108.20 crore in the quarter.

In Europe, the company posted sales of Rs 276.90 crore in the third quarter. In Romania, the firm continued to do well and posted an increase of 20% in revenue.

Further, the company made 37 filings and received 47 approvals in the quarter globally, it said.

"Our key markets continued to perform well attributable in large measure to balanced sales across geographies. This has also been aided by a favourable forex movement," Ranbaxy managing director Arun Sawhney said.

The company said it is co-operating with the US Food and Drug Administration (USFDA) and the Department of Justice for early and comprehensive resolution of all outstanding issues.  The company has put in place enhanced systems and processes in upgrading its manufacturing and research and development facilities.

In 2008, the USFDA had banned over 30 generic medicines manufactured by Ranbaxy after two of its manufacturing plants were found to have not followed the good manufacturing practices prescribed by the US authorities.

During the quarter, Ranbaxy and Daiichi Sankyo announced plans for Ranbaxy to market Tavanic (Levofloxacin) in Romania and South Africa. Levofloxacin is a synthetic antibacterial agent originally discovered by Daiichi Sankyo.

Commenting on the road ahead, the drug major said it will continue to maximise synergies with its parent, Daiichi Sankyo that holds 64% in the company.

"As we move forward, our focus will be on bettering operational performance, maximising synergies with Daiichi Sankyo and on seeking a speedy resolution to the challenges in the USA," Mr Sawhney added.

Brokerage firm Religare Capital maintains a BUY on Ranbaxy with a September 2011 (six-month rolled forward) target price of Rs 720. It adds, "Given the current restructuring exercise and incremental costs, we prefer to value Ranbaxy on EV/sales (versus PE for other companies). We value the base business at Rs630, at 3.4x (15% premium to mean, 55% discount to the sector lead). The NPV of FTF opportunities is at Rs90."

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security).


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