CRISIL says FDI in retail may reduce fruit and vegetable wastages

The ratings agency said the policy to allow FDI in retail is likely to stimulate a flow of investments from organised retailers and logistics companies for establishing quality supply-chain infrastructure for fresh fruits and vegetables.

Ratings agency CRISIL said allowing foreign direct investments (FDI) in multi-brand retail has the potential to reduce the prices of perishable food produce such as fruits and vegetables in India over the long term. About 30% of India's total production of fruits and vegetables is wasted every year due to inadequate cold storage and transport facilities.

"Liberalisation of the retail-FDI policy will help increase organised retail penetration and a likely increase in the sales volumes of fruits and vegetables through modern store formats will encourage large retailers and logistics companies to invest in cold storage and transport facilities," said Sridhar C, head, CRISIL Research.

The ratings agency said the policy to allow FDI in retail is likely to stimulate a flow of investments from organised retailers and logistics companies for establishing quality supply-chain infrastructure for fresh fruits and vegetables. An efficient supply chain will enable large retailers to source vegetable and fruit produce directly from agricultural cooperatives, lowering annual wastages, about Rs630 billion in 2009-10, and reducing commissions of trade intermediaries. This, in turn, will improve realisations to farmers, reduce consumer prices of fruits and vegetables, and increase operating margins of large retailers, CRISIL said.

According to a study by CRISIL, almost 50% of the annual wastages can be prevented if fruit and vegetable retailers have access to specialised cold-storage facilities and refrigerated trucks. Further, large retailers will be able to save on commissions, amounting to 10%-15% of the retail selling price of fruits and vegetables, to trade intermediaries such as commission agents and wholesalers, if they are able to source the produce directly from agricultural cooperatives.  

"The wastage in the supply chain and the commission to trade intermediaries inflate the final price paid by Indian consumers for fruits and vegetables. Indian consumers pay nearly 2-2.5 times the price paid to a farmer as compared to 1-1.5 times in developed markets where the penetration of organised retail is much higher," says Nagarajan Narasimhan, director, CRISIL Research.

According to CRISIL estimates, Rs650 billion will need to be invested over the medium term to build the supply-chain infrastructure for fruits and vegetables. This estimate takes into account the number of cold storage facilities and refrigerated trucks that would be required for handling India's production of fruits and vegetables. The fruit and vegetable segment has so far not attracted adequate investments since organised retailers account for less than 1 per cent of the total sales of fruits and vegetables in India, the ratings agency added.


Moneylife Foundation conducts seminar for senior citizens

Mumbai, 31 July 2010: On a rainy Saturday afternoon, Moneylife Foundation welcomed over 40 enthusiastic persons to its first workshop, especially customised to the needs of senior citizens. This session took note of how senior citizens are coping in the post-liberalisation economy where their costs have soared so much that their savings have been eaten up by inflation. It touched on issues such as wills, insurance and reverse mortgage products that help those who are 'asset rich' but have a meagre income stream.
Sucheta Dalal (Managing Editor, Moneylife magazine) spoke on 'Safety, Security and Financial Independence for Seniors'. 
Debashis Basu (Editor & Publisher, Moneylife magazine) looked at safe investment opportunities, spoke on how to avoid financial mistakes and focussed on the reverse mortgage product in some detail. As always, he advised people to consider index funds as a safer way to participate in the markets and benefit from growth.

Mr Basu also explained the reverse mortgage product in great detail. There was a comparison between the product that was introduced in 2007 and the current one in 2009. The current product has two options. The first option will give more monthly income, but there is no return of purchase price. The second option will give less monthly income, but will return purchase price. The first option is apt for singles who do not want to leave any assets to anyone after death. The second option is apt for couples who want return of purchase price to legal heirs. The 2007 product gave out the least monthly income and hence was unpopular. The 2009 product is a much better one, because it has three-way collaboration between the life insurance sector, the banking sector and the housing finance market. The main drawback is that the monthly income is still taxable. There were a lot of questions from the audience on this topic, as it is a new as well as an interesting concept. 
Seniors who attended the session also had the benefit of inputs from two key resource persons - Mr Nagesh Kini (Activist and Chartered Accountant who has audited insurance companies) and Mr Jayesh Desai (Partner of law firm Singhi & Company) - who participated in a very lively discussion on insurance products and the rules governing wills and transmission of assets.
India has nearly 100 million senior citizens but a very limited vision when it comes to senior citizens' issues; policies for senior citizens are announced but not implemented. And, even as they struggle to cope with soaring costs, senior citizens are often financially exploited - most often by family and people they trust - and they struggle to enhance income. A US study shows that 1 out of 5 senior citizens is the target of financial scams. 
Ms Dalal warned seniors against investing in unregulated schemes or falling for chain and pyramid marketing schemes. She also spoke about the variety of Internet frauds that ensnare people, especially those who are unaware about how the Internet is prone to abuse. Ms Dalal also explained the difference between retirement communities versus old age homes, since the former are fast becoming an attractive option, with great facilities for seniors who are financially comfortable.

She also pointed out that senior citizens must use their experience and skills to consider a second job either as a source of revenue or as contribution to society. It was pointed out that many organisations were happy to offer flexible timings to seniors to benefit from their expertise.

Another issue that came up for discussion was the steep 500% hike in insurance premium by Reliance General. One audience member had purchased a Reliance policy for his parents three years back. It was becoming difficult to change the insurance company because the insured parents were now over 65 years old, hence it was difficult to get a new policy. There was also a discussion on insurers taking away cashless facilities from certain hospitals.
Disha Counselling will be offering free financial advice (not investment advice) at the Moneylife Knowledge Centre every Wednesday and Friday from 2pm to 5:30pm after 11 August 2010. We urge senior citizens and others to take advantage of the same.

The Moneylife Foundation is also coming out with a White Paper on issues concerning senior citizens. During the latest event, all those who attended were requested to read the draft and give their feedback.

Saturday afternoon was surely well worth for everyone who came to the seminar hosted by Moneylife Foundation.



Sailesh Mishra

7 years ago

Excellent effort for welfare and benefit of our Elderly

Prakash Steelage IPO: Pricing appears fair, but debt remains a worry

Its post-issue equity dilution PE works out to 10.80 (at the upper band) and 9.82 (at the lower band) based on the EPS of FY10, while industry average PE is 16.70

Mumbai-based Prakash Steelage Ltd (PSL), a manufacturer of seamless & welded stainless steel pipes, tubes and U-tubes, hits the primary market on 5 August 2010 to raise Rs62.50 crore-Rs68.75 crore. PSL has fixed the IPO price band at Rs100-Rs110 per share. The company is offering 62.50 lakh shares at a face value of Rs10 each.

Qualified Institutional Buyers (QIBs) and Non-institutional Investors (NIIs) have been allotted 30.75 lakh and 9.22 lakh shares respectively. Retail investors will be entitled to 21.52 lakh shares.

PSL's production is done at its two units situated at Silvassa and Umbergaon with total installed production capacity of 12,200 metric tonnes per annum (mtpa).

The issue opens on 5th August for QIBs and closes on 9th August. Bidding for retail investors and NIIs closes on 10th August. 

For the year ended 31 March 2010, PSL's EPS (earnings per share) was Rs15.84. The industry average PE stands at 16.70. At the end of the last fiscal, its debt-to-equity ratio stood at 2.77:1. 

With the post-issue equity dilution, the PE works out to 10.80 at the upper band and 9.82 at the lower band, based on the EPS of FY10.

PSL reported a net profit of Rs17.82 crore on net sales of Rs437.10 crore for the year ended March 2010. Its total income stood at Rs438.38 crore for the same period.

Following a search-and-seizure conducted by Income-Tax authorities in February 2009, the company filed a voluntary declaration of undisclosed income to the tune of Rs15 crore for which it paid Rs4.87 crore as tax on 25 February 2009.

On 6 July 2009, the company again received a notice under the provisions of Section 153(A) of the Income-Tax Act, 1961, directing it to file a true and correct return of total income for the assessment year (AY) 2003-04, AY 2004-05, AY 2005-06, AY 2006-07, AY 2007-08 and AY 2008-09 from the I-T Department.

PSL plans to buy plant & machinery worth Rs33.67 crore and other fixed assets worth Rs1.68 crore from the proceeds of the IPO. As on 31 March 2010, the company had an outstanding unsecured loan of Rs42.80 crore.

The IPO proceeds will also be used to fund expansion of its existing manufacturing facility at Umbergaon at a cost of Rs48.55 crore, and meet additional working capital requirements. 

Keynote Corporate Services is the lead book running manager to the issue. Rating agency Credit Analysis & Research Ltd (CARE) has assigned an 'IPO Grade 2' to the proposed offering, indicating 'Below Average' fundamentals. 


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