Companies & Sectors
Infosys ups exposure in debt mutual fund to record high

Infosys’ investments in debt MFs increased during the December quarter even as its total cash chest remained almost unchanged at Rs22,501 crore

New Delhi: The country’s most cash-rich IT company Infosys has ramped up its investments in debt mutual funds (MFs) to an all-time high of Rs7,365 crore, while paring its bank deposits to the lowest level since June 2010, reports PTI.


The tech major's investments in debt MFs increased during the last quarter ended 31 December 2012, even as its total cash chest remained almost unchanged stood at Rs22,501 crore from the previous quarter level.


After rising sharply in the July-September 2012 quarter to Rs4,986 crore, Infosys’ investments in debt-focussed liquid MF schemes rose even further to Rs7,365 crore as on 31 December 2012.


Large corporates use liquid debt MFs to park cash for short-term and also earn good returns, while waiting to deploy the funds for future projects.


At over Rs7,000 crore, Infosys’ current investment level in liquid mutual funds is the highest-ever for the debt-free firm. The previous record high level for its exposure to liquid MFs was Rs5,200 crore in December 2009, data shows.


On the other hand, Infosys’ bank deposits fell from Rs14,569 crore as on 30 September 2012, to Rs11,943 crore at the end of December, as per the latest quarterly financial accounts. This excludes funds in current accounts.


At the current level, Infosys’ money in bank deposits is at the lowest level since Rs11,732 crore as in June 2010.


Liquid mutual funds are estimated to have given a three-month return of 1.5-2.5% in December quarter.


Besides liquid MFs offering better yields than bank deposits, the fall in bank deposits could also be due to Infosys’ Rs2,000-crore Lodestone buy-out, experts said.


The company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.


Tata Capital says new norms to eat into bottom lines of NBFCs

The new changes for NBFCs proposed by the RBI would negatively impact profits and raise lending rates, feels Tata Capital

Mumbai: Tata Group's finance subsidiary Tata Capital has expressed reservations about the Reserve Bank of India (RBI)'s proposed changes in the norms governing non banking financial companies (NBFCs), saying the move will negatively impact profits and raise lending rates, reports PTI.


“Overall, in the short-run it will impact NBFCs’ profitability and our ability to lend,” Tata Capital Chief Financial Officer Govind Sankaranarayanan told PTI. He, however, added that the new norms are good in the long-term.


The draft norms, based on the recommendations by the Usha Thorat (Former RBI deputy governor) Committee and released last month, seek to bring NBFCs at par with commercial banks.


Stating that banks operate with benefits like recovering money under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (Sarfesi Act) and having access to low-cost deposits, he said, “Only on the disadvantages side you are going to bring it (banks and NBFCs) at par, and thus it becomes difficult.”


“Conceptually, one cannot object to the idea of an NBFC and a bank being similar. But the playing field needs to be uniformly levelled,” Sankaranarayanan said.


Among other recommendations, the RBI wants to cut the time period for classification of an NBFC’s account into an NPA in 90 days from the present 180 days, higher capital adequacy and also a phased jump in the provisioning for standard assets to 0.40% from the present 0.25%.


“All these increase your cost, so if your cost jumps, you will have to pass them over to your customers... to some extent, lending costs will go up by a bit and to some extent you will not lend to some people,” the Tata Capital official pointed out.


He further stated that the weaker than the best rated borrowers residing in small towns, availing money for commercial vehicles and farm equipments and small businesses—traditional businesses for NBFCs—will suffer in this case.


Sankaranarayanan said even after the gloomy news on the economic front, Tata Capital will meet its targeted credit growth of up to 30% this fiscal as the company is on an expansion mode.


NRI deposits nearly double to $11.24 billion in April-November period

Even though the Indian rupee has appreciated from its all-time low, inflows into NRI deposits continue on the back of higher interest rates

Mumbai: Continuing rupee fall and higher interest rate have seen deposits by non-resident Indians (NRIs) nearly doubling in the first eight months of 2012-13 to $11.24 billion from $6.39 billion a year ago, reports PTI quoting data from the Reserve Bank of India (RBI).


However, the non-resident (ordinary) rupee accounts and foreign currency non-resident accounts saw an outflow this year as against an inflow last year, according to the central bank data.


It can be noted that the rupee had hit an all-time low of 57.32 to the dollar on 14th June. However, last Friday, the rupee ended at 54.76 to the dollar, which is 4.67% stronger from its all-time low.


Even though the currency has appreciated from its all-time low, inflows into NRI deposits continue on the back of higher interest rates.


It can be noted that following the rupee fall in December 2011, the RBI had deregulated interest rates on NRI deposits, forcing banks to hike rates of such deposits sharply, which now hover over 10%, while banks were lowering rates for domestic deposits.


Following the steep fall in the rupee, which began with the downgrade of the US rating by S&P in August 2011, in November, the RBI had raised maximum interest rates on NRE accounts for one-year-plus to Libor plus 275 basis points (bps).


This deregulation resulted in a surge in inflows in the January-May period of 2012. But, inflows started ebbing out and November 2012 saw the lowest inflow in nine months.


The RBI again hiked the cap on interest rates for Foreign Currency Non Residential (FCNR) account, raising it to 200 bps above the Libor for one-three-year deposits and 300 bps for deposits in the three-five year bucket.


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