ICICI, 2 other banks on Moody’s notice for possible downgrade

Moody’s Investors Service said it has placed on review for downgrade three banks in India (ICICI Bank, HDFC Bank and Axis Bank), whose standalone credit assessments are currently positioned above India’s sovereign debt rating

New Delhi: Global ratings agency Moody’s on Monday placed credit ratings of leading private sector banks, ICICI Bank, HDFC Bank and Axis Bank, on watch for a possible downgrade within three months, reports PTI.

Moody’s Investors Service said it has placed on review for downgrade three banks in India (ICICI Bank, HDFC Bank and Axis Bank), whose standalone credit assessments are currently positioned above India’s sovereign debt rating.

The announcement reflects Moody’s revised assessment of the linkage between the credit profiles of sovereigns and financial institutions globally.

“Consistent with this guidance, Moody’s expects to position the standalone credit assessments of most banks globally at (or below) the rating of the sovereign where the bank is domiciled,” Moody’s Investors Service said adding “Moody’s expects to conclude the reviews within approximately three months”.

In its reaction, ICICI Bank’s spokesperson said: “The rating action by Moody’s is not a change in the sovereign rating of India and not affect ratings of any instrument issued by ICICI Bank (bonds or deposits).

“Our ALM (Asset Liability Management) is well matched with asset repayments in FY 12-13 broadly covering our bond and loan repayment obligations. We do not need to access bond markets for refinance. We will look at accessing the markets to raise funds for new lending depending on the cost and the rates at which we can deploy the funds,” ICICI said.

Moody’s has also placed the insurance financial strength rating of Life Insurance Corporation of India (LIC) under review for possible downgrade.

The announcements come close on the heels of lowering of rating outlook of 11 financial institutions, including these three private banks, by Standard and Poor’s.

All the three banks have ‘baa2’ foreign currency long-term ratings from Moody’s, which reflects medium-grade investment rating with some speculative elements and moderate credit risk.

Another statement said that “Moody’s has placed the insurance financial strength rating of Life Insurance Corporation of India (LIC) (Baa2/stable) under review for possible downgrade”.

Moody’s said that the review for downgrade reflects LIC’s direct exposure to the Indian sovereign risk in terms of its investment portfolio and business profile.

As of 31 December 2011, government securities and government guaranteed bonds represented 54% (Rs6 lakh crore or about $111 billion) of the insurer’s total cash and invested assets and 764% of adjusted shareholders’ equity, the statement said.

It said almost 100% of its net premiums earned are from India.

“Furthermore, LIC has been increasing its exposure to public sector banks through equity investment, in addition to the purchase of shares in Oil and Natural Gas Corporation which is 69.14% owned by the Indian government in March 2012,” it added.

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Nasscom optimistic on growth despite uncertain eco environment

The global economic uncertainty has led to projected flat or reduction in budgets for outsourcing services by western clients, which has in turn sparked fears about the performance of Indian players, who get almost 80% of their revenues from the US and European markets

New Delhi: Newly appointed Nasscom chairman N Chandrasekaran on Monday expressed confidence that the $100 billion Indian IT-BPO sector will grow at 11%-14%, despite the global economic uncertainties and muted forecast by some member companies, reports PTI.

“Overall, technology has an important role to play whether you look at this year or any other year. It will play an important role in the revival of markets and businesses.

Along with that the emergence of new powerful technologies be it cloud or big data, there are tremendous opportunities globally and nationally,” Mr Chandrasekaran told reporters here.

All these things will play to the strength of the Indian IT industry, he said, adding that the software body is continuing with its 11%-14% growth forecast and will take a re-look at it in October.

The global economic uncertainty has led to projected flat or reduction in budgets for outsourcing services by western clients, which has in turn sparked fears about the performance of Indian players, who get almost 80% of their revenues from the US and European markets.

With Infosys and Wipro giving muted guidance, these fears were further strengthened. However, the performance of others like TCS and HCL Technologies did provide hope that demand still existed, even if on a smaller level.

Mr Chandrasekaran, who is also the CEO of the country’s largest software exporter Tata Consultancy Services (TCS), said there are numerous opportunities available and the focus needs to be on underpenetrated markets like Eastern Europe, Latin America and Japan.

Nasscom has also appointed MindTree CEO Krishnakumar Natarajan as vice chairman of the4 executive council for 2012-13.

Asked about the challenges being faced by the Indian companies, the senior officials said the foremost task was to tide over the current environment.

“A McKinsey estimate is that by 2020, the industry will be between $220-$300 billion and that is a huge opportunity for the Indian IT industry. There could be short term challenges but in the long term, competitiveness of Indian IT industry is strong,” he said.

He added that the industry has changed from taking orders to helping companies transform their business and this will drive the growth further.

Mr Chandrasekaran said the executive council will work on re-inventing and embracing new business models, strengthening innovation capacity and research capabilities of Indian players, strengthening long-term entrepreneurial environment.

On the issue of visa rejections, Mr Chandrasekaran said it continues to be an issue.

“However, companies are now planning to tackle this, be it through local resourcing or applying ahead of time. There is also a better understanding that it is not labour movement but that of highly skilled manpower,” he added.

Nasscom would also work on enhancing skilled talent pool in the country and focus on specialisation.

“One of the key priorities for Nasscom is to build the future companies of the industry and I look forward to take this initiative to greater heights,” Mr Natarajan said.

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Core sector growth slips to 2% in March; 4.3% in FY11-12

The growth rate of eight industries which have a weightage of 37.9% in the Index of Industrial Production, in March moderated to 2% from 6.5% in the same month last year

New Delhi: Reflecting a slowdown in the economy, the growth rate of eight core infrastructure sectors dipped to 2% in March and 4.3% during 2011-12 on account of poor performance in crude oil and natural gas, reports PTI.

The growth rate of eight industries—crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel—which have a weightage of 37.9% in the Index of Industrial Production (IIP), in March moderated to 2% from 6.5% in the same month last year.

The cumulative growth rate of infrastructure industries during fiscal 2010-11 slowed down to 4.3%, down from 6.6% in 2010-11.

The dismal performance of core industries, according to experts, points to economic slowdown and will have implications for industrial production data to be released on 12th May.

“Of-course, it will affect. Not only now, it will also affect IIP in the next year due to lagged effect. It’s an ongoing problem. What we need is policy attention,” Ficci secretary general Rajiv Kumar said.

The data, he added, “reaffirms the worst fears and the economy is in a midst of a real slowdown. The government needs to take several steps.” 

As per the data released by the government, natural gas and crude oil contracted by 10.1% and 2.9% respectively.

Steel, electricity and fertiliser output slowed down by 2.3%, 2.1% and 1.5%, respectively in the month under review compared to 12%, 7.6% and 3.9%, respectively a year ago.

Crisil chief economist DK Joshi said, the core sector data “will affect the overall IIP” which will be released next month.

Petroleum refinery output dipped by 1.6% compared to 8.5% in March 2011.

However, on the positive side, coal and cement output grew by 6.8% and 7.1%, respectively.

During 2011-12 fiscal, natural gas output contracted to 8.9% compared to 10% in 2010-11.

Coal, refinery products and cement output grew by 1.2%, 3.2% and 6.7% respectively in 2011-12 compared to contraction of 0.2%, growth of 3% and 4.5% in the previous fiscal.

Electricity and fertilisers too grew by 8% and 0.4% against 5.6% and zero per cent in the year ago period.

The growth rate of crude oil and steel slowed to 1% and 7%, respectively compared to growth at 11.9% and 13.2%, respectively during the same period of 2010-11.

The annual economic growth rate has slowed to 6.9% in 2011-12 compared to 8.4% in previous two financial years.

Fragile economic recovery in the US and Europe and subdued business sentiments at home affected the growth of the industrial sector in the current year, as per the Economic Survey 2011-12.

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