Corporations still cautious about recovery in 2010, says E&Y

More than 50% of executives from major corporations in West Asia and Africa agree that surviving 2010 would remain a challenge

The corporate world is still nervous about economic recovery, a survey of senior executives at nearly 900 major companies worldwide has revealed, reports PTI.

More than 50% of executives from major corporations in West Asia and Africa took part in the study conducted by global consultancy firm Ernst & Young (E&Y).

The research revealed that over half (53%) of the companies agreed that surviving 2010 would still remain a challenge compared to nearly three-quarters who had said that they were focused on securing the survival of their present business last year.

However, the percentage looking to pursue new ventures this year has also risen to 34% from 19% in January 2009.

Companies focused on improving the performance of their current assets were down to 27% from 39%, and the proportion still restructuring their business also dropped to 27% from 37% over the year.

Tariq Sadiq, West Asia markets leader, E&Y West Asia said, "The region has, in varying degrees, bucked the more extreme after-effects of the downturn."

Organisations may be less worried about survival over the next 12 months, but the return to a healthy operating environment is still some way off.

The overwhelming view is that most companies are still focused on securing the present, which means that they are still in the early stages of responding to the current environment.
 

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Newsviewer Exclusive
IFCI doles out Rs225 crore loan to Morepen-related entity

State-run IFCI itself is unsustainable and was bailed out by the government in the past. It has sanctioned a loan of Rs225 crore to an entity which is on the RBI list of wilful defaulters

IFCI Ltd, which has been running on grants from the Indian government and is undergoing a massive restructuring (more about that later) has sanctioned a whopping Rs225 crore loan to Blue Coast Hotels Ltd, formerly known  as Blue Coast Hotels & Resorts Ltd. Before that, the entity was known as Morepen Hotels Ltd.

Incidentally, both these entities are related to Sushil Suri, a prominent name on the RBI’s wilful defaulters list, and Blue Coast still owes Rs10 crore to the state-run financer, said a company official from IFCI. As of December 2009, Mr Suri owned 0.37% stake in Blue Coast Hotels and 1.22% stake in Morepen Laboratories Ltd. Blue Coast Hotels & Resorts is a group company of Morepen Laboratories where Sushil Suri is chairman and managing director.

The entire process of sanctioning Rs225 crore to Blue Coast Hotels took less than 10 days and has raised many eyebrows in IFCI corridors as well. IFCI has also decided to add Rs10 crore to the total amount sanctioned for Blue Coast Hotels so that the hotelier can honour the debt.

Apparently, it seems that Mr Suri, who had appeared in the RBI’s ‘wilful defaulters list’, is no longer a defaulter. “We have received a certificate from the statutory auditors of the company (Blue Coast) saying that his name is no longer on the RBI’s wilful defaulters list,” said an official from IFCI. The official, however, declined to comment on the terms of the deal.

A source close to the developments said, “I find it hard to find another example of a financial institution sanctioning a large loan to a group that is already in default. The entire process from application to sanction took less than 10 days with the loan originating from IFCI's Hyderabad office. It is also a matter of concern that IFCI is giving loan to a person who is on RBI's 'wilful defaulters list'.”

According to the filing to the Bombay Stock Exchange (BSE), Morpen Laboratories had a total debt of Rs757 crore. The company incurred a net loss of Rs10.90 crore for the quarter ended December 2009 compared to Rs13.50 crore for the corresponding period last year.

Separately, the government has invited expressions of interest for a study of key strategic issues pertaining to IFCI. The consulting firm will be mandated to examine the current business model of IFCI in the context of the business environment and to explore comprehensively the strategic choices for the future business model so as to ensure economic viability and long-term sustainability, the government said in a notification.

By 2002, IFCI had accumulated huge losses which completely eroded its equity capital and reserves. To avoid any further crisis, in 2002-03, the government, in consultation with state-run banks and financial institutions, had worked out a restructuring package for IFCI, which included financial assistance of Rs5,220 crore to the entity over the period from 2003 to 2011-12. Under this package, the first tranche of Rs523 crore was provided as optional convertible debentures with a right to recompense at par and Rs2,409.30 as grants till 2006-07.

According to the government notification, the broad terms of the assignment of the consulting firm are as follows.
1) Whether the business model of IFCI is sustainable in terms of risk, profitability and return over the medium to long term, in the present day economic and regulatory environment.

2) What are the incremental activities or areas which can be aligned with the existing business model of IFCI to add to its profitability and to assure a robust sustainable growth strategy?

3) What would be a better fit for IFCI (a) induction of a strategic investor, (b) merger with a public-sector entity, and (c) continuing as it is on a standalone basis? These options should clearly articulate the areas of synergy and value creation.

4) How can the interest of the government be safeguarded in the event of induction of a strategic investor or merger with a public sector entity, keeping in view the government’s holding of Rs523 crore, Optionally Convertible Debentures (OCDs) in IFCI and outstanding government guarantees to IFCI which were Rs2,468 crore as on 31 March 2009?
 

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COMMENTS

Black Mamba

5 years ago

RBI master circular on willful defaulters clearly states that as a penal measure no banks or FI will advance any loan to any entity owned by a willful defaulter. Did anyone question RBI/IFCI about the gross violation of the RBI guideline in 2010.

praveen grover

7 years ago

informative one

Sharad

7 years ago

Bravo once again how do you smell out these rats and low life is amazing,hope somebody up there does something to prevent such blatant frauds using public money.One day years down the line Mr Suri will be elected or nominated to the Parliament and a la Jindals (of the steel fame )who had also siphoned off public money and the FI's in early 2000's had bailed them out , will become a "respectable" industrialist and will have glowing editorials written about him and also feature on TV shows Walking and Talking about his vision for the motherland and it's people. Expose the scumbags and pray we have enough courage to hound these ba...... from public life.

anand khare

7 years ago

Mr Suri Is Willful and habitual defaulter.
He has cheated small investors and
so far seems to be successful, thanks
to company law board who seems to be incollusion with him, otherwise with all the power vested inCLB they would have taken action against Suri.to make
him return Money of FD holders.
Now the public money will also go down the drain thru IFCI. this is scam worth investigating.

Newsviewer Exclusive
IFAs miffed by growing transfer of assets under management

An increasing number of HNIs are openly bargaining with fund distributors to get a share of trail commission

The confusion over accounting of trail commissions continues to rattle the mutual fund industry. On the one hand, there was a clear need to stop the practice of tying investors to a specific distributor in perpetuity or to ask them to get a no-objection certificate in order for them to shift to another distributor.

In late December, the Securities and Exchange Board of India (SEBI) directed the Association of Mutual Funds in India (AMFI) to implement its own earlier decision that said that funds should pay trail commission to new distributors when the client has moved away from one distributor to another.

Moneylife Digital has reported earlier (see here) on the confusion arising over implementation of this rule without examining all the issues and consequences. It has led to a raging battle to transfer assets under management (AUMs) by hook or by crook. Distributors tell Moneylife Digital that investors are being asked to sign a scrap of paper where the fine print permits the transfer of their AUM to a new distributor; these sources say that banks have been especially active in obtaining such a transfer under the guise of consolidating investors' accounts.

With independent financial advisors (IFAs) reluctant to service small investors after SEBI scrapped the entry load, it has been a happy hunting ground for banks to get the business of such customers. Naturally, IFAs are outraged. They are especially angry at mutual fund companies that are in a hurry to accept and act on these requests to transfer AUMs. The game has shifted from serving the investor to running after trail commissions.

Moneylife had earlier reported that the chase for trail commission business is gaining traction among the largest banks and financial advisory firms like HDFC, NJ IndiaInvest and Prudent Corporate Advisory Services who are actively encouraging their team to snatch AUMs.

"Now I am getting threatening calls from high net-worth individuals (HNIs) saying that now that you are getting paid (trail commission), how much (of the commission) are you ready to part with me, or I will transfer the AUM. I have no option but to agree, otherwise he (the HNI) will move to some other broker," says an IFA.

But many agree that who deserves the trail commission is the moot question. When an investor who has bought a scheme from distributor A and transfers it to B, the general understanding is that B will begin to earn the trail commission. And hence the rush to get investors to sign a transfer form. But B has done nothing to earn that investment, so some IFAs themselves admit that it seems unfair that B has to be paid. On the other hand, A cannot continue to earn the trail when the investor has moved away. So should trail commissions be abolished when an investor shifts to another distributor? Some agree, even though it would deal yet another blow to the IFA industry. The solution is obviously to find another way to compensate advisors.

What is worse, the only beneficiary in all of SEBI's actions seems to have been banks and bank distributors. Was this the end goal that SEBI had in mind when it scrapped entry loads? And shouldn't the regulator have examined the issue of trail commissions fully over the past couple of years, when investors had been complaining about not being able to switch IFAs?
Top SEBI officials have taken the position that the industry will learn to swim and find a solution. But as things stand, mutual funds are only sinking with large sums of money flying out of the industry. That result defeats the government's stated objective of encouraging retail investors to participate in the capital market through mutual funds. Isn't SEBI completely out of sync with this objective?
 

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COMMENTS

sudhir

5 years ago

to mr. vijay kumar,
the ADAG group is not highly trustworthy.

Bosco Fernandes

7 years ago

Every action taken by regulators must keep long term perspective in mind and must be in the best interest of all

MANISH LAKHANI

7 years ago

IF THE SHIFTING IS NOT ALLOWED THEN THE DISTRIBUTORS WILL TELL INVESTORS TO REDEEM AND AND INVEST IN THENEW DISTRIBUTOR CODE AND THISWILL LEAD TO LOT OF REDEMPTIONS UNNECESSARILY AND HARMFUL FOR THE INDUSTRY GROWTH SO LET THE INVESTOR DECIDE WITH FROM WHICH DISTRIBUTOR HE WANTS SERVICE AND THE TRIAL COMMISSION TO BE PAID TO HIM ULTIMATE DECISION SHOULD BE WITH THE INVESTOR AND IF ANY INVESTOR COMPLAINS THAT THE SIGN IN FORM IS TAKEN WITHOUT HIS KNOWLEDGE THEN THE ACTION CAN BE TAKEN AGAINST THE DISTRIBUTOR AND PENALTY OR F RECOVERY OF COMMISSION CAN BE DONE BYTHE AMC CONCERNED WHY THE INVESTOR SHOULD SUFFER IF GENUINLY HE WANTS SERVICE FROM ANOTHER DISTRIBUTOR IF THE OLD DISTRIBUTOR ISNOT GIVING SERVICE THEN THE INVERSTOR HAS EVERY RIGHT TO CHANGE THE DISTRIBUTOR AND THE NEW DISTRIBUTOR SHOULD GET THE TRAIL COMMISSION FOR HIS SERVICES

Vijay Kumar

7 years ago

I have redeemed many mutual funds on 10th March 2010 here is the list

sundaram selcet focus - sip
Religere psu
Tata p/e
reliance growth
Reliance Natural Resource
SBI Midcap
Tata infracsture
Birla ,95
SBI Multicap
HDFC multicap

I have received all the DD/ Cheques/Warrents and the money has alredy come to my account, except Reliance.

Till today i haven't got the DD and once I get it, it will take 3 more days to get the money. We are really disappointed with Reliance.

Next time I will never suggest Reliance to any one.

IFA

7 years ago

The hasty step of abolition of entry load & with that abolition of upfront brokerage payment to MF Distributors is one of the hasty decisions implemented & one of the biggest blunders by SEBI. SEBI has done this as a 1-way step without implementing this step in a phased e.g. within 1 year timeframe. Also, SEBI has done this without making sure to educate investors that NOBODY except for NGOs & Saints give any free service anywhere in this world. EVEN AMCs & SEBI is not giving any free service to investors. Even, SEBI is being funded thorugh & SEBI Officials including Mr. Bhave are paid salary thorugh taxpayers' money. Hence, investors also need to pay advisors for each & every service rendered by them & should not expect any free service. But unfortunately, this has NOT been done by SEBI.

Vinayak Kulkarni

7 years ago

Dear Anurag Bhasin,I didn't pass intentionally any comment on bank's marketing(Cheating their customer?) of mutual funds.I have mentioned Two specific points i.e. 1-Just passing AMFI / IRDA exam person is becoming so called Advisor.2-With some exception majority IFAs are involved in malpractices.
Other point highlighted is financial literacy.Unfortunately nobody is interested,neighter SEBI/MFs/Banks nor IFAs.With blaming watchdog is simpler process than changing attitude.

bhaskar mukherji

7 years ago

who is actually misselling?just go to a bank & the banker will force u to buy a mf or an insurance.and u to satisfy the banker, will purchase without knowing the details of the fund.then when the service part comes the banker will say, are yeh toh mf hai jaake unke paas dikhaiye.now the investor will start getting harassed by a chain of people. registrar will say the bank mandate is wrong, signature not matching etc.,also will come in the picture.analyse this situation mr bhave, the most idiotic officer. come to the earth,

ROOPSINGH

7 years ago

EVRY EFFORT OF MONEYLIFE IN REAGRD TO RAISING ISSUES RELATED TO INVESTING ARE HIGHLY APPECIATABLE-LOOKING TO SITUATION WHERE MOST OF OTHER MEDIA PUBLICATIONS ARE MOUTH SHUT-THE POINTS RAISED ARE GROUND REALITIES WHICH PEOPLE SITTING IN AC ROOMS NEVER CONCERNED-THEY JUST THINK THEY HAVE BEEN GIVEN POWERS TO ISSUE FATWAS LIKE TUGHLAKI FARMANS-IT SEEMS THEY ARE LEAST CONCERNED TO BURNING ISSUES ARISED DUE TO THEIR WRONG DECISIONS-THE FACT IS THAT''BADSHAH KO KAUN BOLE KE WOH EK NUMBER KA BEWKUF HAI''

A V Shah Rajkot

7 years ago

I congratulate Moneylife for highlighitng this issue in the interest of ifa and investors.
thanks again.

K N Swamy

7 years ago

I am really surprised to find that sebi has abolished entry load since last 6 months and IFA are compalining about it but not a single ifa has files petition in court.
sebi must be challenged in court for removing entry load.

DILIP MEHTA

7 years ago

SEBI HAS BECOME DICTATOR AND FASCIST BY ITS SEVERAL ACTS-BEING PORTRAYING ITSELF AS 'SUPREMO OF STOCK MARKET''BUT THE REALITY STANDS QUITE OPPOSITE-SEBI HELDS MEETING WHICH R NEVER PUBLICISED LIKE RBI OR LOKSABHA-IT MAKES CLOSED DOORS MEETING WITH UNKNOWN PEOPLE AND NEVER SPEAKS WHAT THE PARTICIPANTS EXPRESSES-LIKE WHO WERE PRESENT IN MEETING AND WHAT AGENDA WAS TO BE DISCUSSED-THE ONLY OUTCOME IS VARIOUS FATWAS WHICH R FOOLISH AND ILL INTENTIONAL TO INDUSTRY AND IFA'S-IF CHURNING WAS THE REASON FOR BANNING ENTRY LOAD-SEBI OFFICIALS MUST BE HANGED IN PUBLIC WHO ENCOURAGED CHURNING BY PERMITTING MONTHLY NFO'S BY AMC'S-INSTEAD WHOLE BLAME HAS BEEN GIVEN TO POOR IFA'S-THIS IS ALL CORRUPTION DONE BY SEBI PEOPLE TO MAKE NEW FATWAS-LIKE NEW FATWA OF ATMS'-THESE FOOLS WHO R TAUGHT BY AMC' PROFESSIONAL TO ISSUE FATWAS DO NOT KNOW-ATM'S R ALWAYS FULL FOR MONEY TENDERING-THEN WHAT WILL HAPPEN IF PEOPLE WILL QUE UP TO LEARN abc OF MF,JUST SEE FATE OF FATWA OF TRADING THROUGH BOLT-IT SEEMS THAT ONLY REASON FOR SUCH ACTS IS NOT SERVING INVESTORS BUT SERVING FEW TOP BRASSES OF MF INDUSTRY.

MANAV

7 years ago

MR V S KULKARNI MUST REMEMBER THAT MOST OF BANKS USE CASH CREDIT FACILITY AS GATEWAY FOR PROCURING INSURANCE AND MF BUSINESS FROM CLIENTS FORCEFULLY-THERE R THOUSANDS TESTIMONY TO PROVE THIS-MOST OF CLEINTS OF IFA'S HAVE FOUND CLIENTS BEING FORCED TO TAKE INSURANCE AND MF FROM BANKS IF THEY WANT LOAN OR CREDIT FACILITY-WHERE R MORALS GONE MR KULKARNI?DONT BLAME IFA'S-THEY SERVICE CLIENTS AT DOORSTEP WITH LEAST FEES AND BEST ADVICE-BANKS WERE LARGEST CHURNING MACHINES WHICH IS PROVED BY HEFTY COMMISSIONS GIVEN TO BANKS BY AMC'S-IFA'S EARN BY SHEER HARD WORK-AND DEDICATED SERVICES-BUT THIS UNFAIR GAME HAS BEGUN BCOS TOP REGULATOR IS ITSELF CORRUPT AND SOLD OUT-SO WHATEVER IS CRIED WILL REMAIN UNHEARD-BUT SOME DAY ''PAP KA GHADA BHAREGA''.

MANAV

7 years ago

SEBI ka pap ka ghada bhar gaya hai(its sinful activities have begun to flow out of pot-just see todays news headlines of SEBI official caught with one crore in CBI raid-it seems this pampered organisation of finance ministry has become unresposible and unanswerable to none-sign of clear dicattorship-which ends with corruption and malpractices-thanks to CBI which made the skeleton to dig out-and it is surity that top most officials of SEBI have become corrupt after they became puppets to some vested interests of the industry leaders-bcos most of times-SEBI chief conducts closed door meeting with top brasses of industry without any information getting leaked on the agenda-and it is very secretly done without involvement of any retail investors or IFA's-this all dirty tricky game is clear indication of malpractices and corruption involved in SEBI officials-thats the reason some scriprs can go 130 times on listing day-oh god-u r too tiny in front of these self claiming gods sitting in SEBI.

Anurag Bhasin

7 years ago

Dear Sadagopalan,
you are qualified CFP , why hyou should worry about trail fees, you can easily charge your investors for your advise and services.
All IFA are not as lucky as you who gets mileage of appearing through articles.
Would you accept a investor who just want to invest Rs.10,000 .would you prepar a financial plan for him?

Anurag Bhasin

7 years ago

"With loyal & honest dedicated service with knowledge bank do get good clients who are not interested in your part of brokerage"
I have strong objection on above quote of V S Kulkarni.
RM of Banks are one of the worst category where what is important is only their "target" and not the investor.
more than 50% of the bank a/c holder/investor do not know-how much charges debtited to theri a/c.
axis bank is still fighting over reversal of advisory fees which they charged to invesotr without informing while "SELLING"(I mean selling not advising)
Banks can easily sell ULIP to a 70 yr old person but IFA can not because he has to face investor eye to eye.
All IFAs are not as beautiful as female RM of bank(No need to explain further) and smart like Bank's RM.
Bank RMs are not taught product knowledge but soft skill how to misrepresent products.

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