Govt to decide on SBI’s rights issue within a fortnight

New Delhi/Mumbai: The government today said it will take a call within a fortnight on whether State Bank of India (SBI) should be allowed to go for the rights issue, which is expected to be in the range of Rs18,000-Rs21,000 crore, less than the original estimate, reports PTI.

"We are number crunching that (SBI proposal of Rs20,000 crore rights issue) at this point of time. I think some decision would be taken perhaps in next 15 days," financial services secretary R Gopalan said on the sidelines of an event by consultant Skoch here.

He said the presumptions under which the additional requirement has been asked for are being looked into by the government.

"So, amount in any case is dependent on what we arrive at along with SBI. As to how valid those presumptions are, so that exercise is on at this point of time," Mr Gopalan said.

"So once that is there, the next question is what form we will be doing it. That is also being discussed with SBI," he added.

The government holds about 59% stake in SBI. If it clears the proposal, the government will have to subscribe the issue to the extent of its holding, so as to maintain its stakeholding at the existing level.

Depending on the decision taken, Mr Gopalan said there could be implications on the budget.

"There can be implications on budget or it can be neutral on budget, so we will take a view," he said.

If the government decides to subscribe to the rights issue in cash, it will have to go for additional expenditure.

However, if it decides to subscribe the issue through bonds, the effect may be felt later. The decision will be taken in the current fiscal.

However, disbursement can be made either during this fiscal or next fiscal subject to the decision made, Mr Gopalan said.

SBI exuded confidence that rights issue will happen this fiscal.

"I expect the approvals from the govt to come this month and the issue will definitely come out this fiscal," SBI chairman O P Bhatt said in Mumbai.

He said the government has accepted that SBI needs capital.

"We had asked for a rights issue of Rs24,000 crore, but as the government will have to contribute around Rs12,000 cr ...

There's a budgetary process involved, starting with due diligence and other studies, which are being carried out. The final issue size would be around Rs18-Rs21,000 crore," Mr Bhatt told reporters on the sidelines of international banking and finance conference.


Inclement weather, burgeoning demand push up natural rubber prices

A number of major rubber-producing nations have witnessed extensive damage to their plantations due to heavy rainfall, which has caused a demand-supply shortage 

Prices of natural rubber which have seen an upward movement in recent weeks due to lower supply and higher demand, may remain flat after December, say experts. On Monday, natural rubber touched an all-time high of Rs202 per kg in the Indian market.
"Rubber prices are rising as there are supply constraints. Heavy rains in the southern region have affected rubber collection. As there is no respite from these rains, rubber prices may go up by another Rs2 to Rs3 (per kg). However, the weather should improve after December; rubber production will be back on track," said Ibrahim Jalal, treasurer, Indian Rubber Dealers Federation, an all-India rubber dealers' association.

Heavy rain in major natural rubber producing countries (Thailand, Indonesia, Malaysia and Vietnam) has damaged rubber plantations, leading to a supply shortage amid strong demand from consumer-tyre manufacturers in these countries. The growing demand for rubber is fuelling prices almost on a daily basis.

"Prices are increasing in the domestic and international markets. It's difficult to predict tomorrow's prices. There has been unexpected rain in November and it is disturbing the tapping process. Even whatever rubber that has been tapped is not coming into the market," Biney Kurian, deputy director, marketing, Indian Rubber Board, told Moneylife.

"We are expecting a little correction once the weather improves. Many manufactures are running out of stock, so their first objective will be to fill up their inventories," said Mr Kurian.

A CRISIL Research spokesperson told Moneylife, "Global prices of natural rubber have been ruling high in the current year due to supply issues arising from natural calamities in Malaysia and Thailand, two major rubber-producing countries. Domestic prices between April-October were higher than the previous year by 70 %. While we do not expect any further increase in rubber prices for the rest of the year, average prices for FY11 will be higher by 55%-60%."

According to Thailand's Department of Disaster Prevention and Mitigation, about 1.9 million acres of agricultural land, or 4.8% of total arable land, was damaged by floods that spread across 51 provinces in that country.
"Bad weather in these countries has affected rubber production and it would prop prices at the international level as well," Mr Jalal said.
According to data published by the Indian Rubber Board, last month, the price of Ribbed Smoked Sheet four grade (RSS-4) grew by Rs1,467 to Rs18,112 per 100kg (quintal), while RSS-3 surged by Rs1,337 to Rs18,506 per quintal.

The rally continued in the first week of this month as RSS-4 prices went up further by Rs647 to Rs19,580 per quintal. Prices of RSS-4 on the Bangkok Commodity Exchange increased by Rs 405 to 19,504/100 kg for the first week ending 6th November.
In India, rubber production dropped 7.6% to 82,000 tonnes last month compared with 88,775 tonnes in the same month of last year. However, the consumption stood at 81,500 tonnes in October against 77,650 tonnes in the same month of last year.

The drop in production was due to heavy rain in Kerala, according to Mr Jalal.
Natural rubber imports in India surged by 81.2% to 18,148 tonnes in October on increased demand from tyre manufacturers and slowdown in production. Surge in prices of rubber has reflected in prices of tyres. Since April, prices of tyres have increased by 10%.
"Tyre producers have not increased prices of their products since the last two months, but raw material prices are very volatile and it's difficult for them to fix prices. In the future, if prices show the (same) uptrend, then tyre companies would think of hiking prices of products," a senior official from the Automotive Tyre Manufacturers' Association (ATMA), who preferred anonymity, told Moneylife.
According to ATMA, during September, tyre production increased 26% to 1 crore units from 79.8 lakh units, the same month a year ago. The average monthly production for the first six months of this year grew by 28% to 95.3 lakh units compared with 74.4 lakh units during the same period last year.


Food inflation falls to 12.30%; declines for 4th week in a row

New Delhi: Food inflation declined to 12.30% for the week ended 30th October from 12.85% in the previous week, on improved supply of items, showing a downward movement for the fourth straight week, reports PTI.

While most food items like wheat, pulses and potatoes turned cheaper, onions became costlier as their prices rose about 10% within a week.

Considering that food inflation stood at a high of 12.59% during the corresponding week of last year, even 12.30% inflation is quite elevated.

Earlier this month, the Reserve Bank of India (RBI) raised its short-term rates to tame inflation saying prices of protein based food items are still high.

However, the prime minister's advisory panel believes that food inflation could be tamed through improved production.

At a function, Prime Minister's Economic Advisory Council chairman C Rangarajan said, "Food inflation is caused by shortage of food and supply. In the mid-term we need to ensure that supply is increased through production to curb inflation."


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