SEBs witnessed losses due to lack of periodic tariff revision and high T&D losses which are in excess of 30%. The rising losses and debt level in SEBs are biggest risk to banks credit exposure, the central bank said
With incremental credit to the power and telecom sector outpacing the aggregate growth of the banking sector credit, the Reserve Bank of India (RBI) has called for “careful monitoring of assets quality of these segments.” It also remains cautious of the deteriorating assest quality of the banking sector.
The apex bank, in its Financial Stability Report (FSR), said that, “The risk that banks face on account of their exposure to power sector is due to two reasons: rising losses and debt levels in SEBs (State Electricity Boards) and shortage of fuel availability for power sector.”
SEBs witnessed losses due to lack of periodic tariff revision and high T&D losses which are in excess of 30%. Despite the SEBs being bifurcated into three entities, their ownership, maintenance, financial well being and cash flow continue to remain dependent on each other.
Even the Shunglu Committee, constituted in July 2010 to look into the financial problems of SEBs, has recommended setting up of a special purpose vehicle (SPV), in which RBI will hold 76% while Power Finance Corp (PFC) and Rural Electrification Corp Ltd (REC) will own the balance in equal proportion, to restructure the debt of SEBs.
Power sector, the report says is also facing shortage of coal supply. It adds that, “Against this backdrop, there is anecdotal evidence of many lenders being cautious in extending loan to the sector.
The report revealed that out of the total impaired and restructured accounts in the banking sector, power and telecom sector, together, rose to 8.5% for June 2011, from 5% in March 2011. In terms of infrastructure credit, these sectors accounted for 77%.
According to the FSR, sectors like retail, real estate and infrastructure together contributed to 85% of the gross non-performing assets (NPA) at the end of September 2011. Overall, the growth of NPAs stood at 30.5% and slippages at 92.8% for the same period, outnumbering the 19.2% credit growth.
The report says that, “Higher provisioning requirements, consequent to higher non-performing assets and higher interest expenses have put pressure on banks’ profitability.”
Commenting on the banking sector, RBI said, “With further slowdown in credit cycle expected on the back of higher interest rate environment and slowing economy, deteriorating assest quality will emerge as a challenge for the banking sector.” However, despite the rising NPAs the report sounded positive the outlook of the banking sector compared to other developed countries.
“The turmoil in the euro zone has fanned fears of deleveraging by the European banks. Though Indian banks are not expected to have any direct impact on account of their negligible exposure to the troubled zone, indirect impact on account of funding pressure could be seen,” the FSR added.
During 2011, five movies crossed the Rs100 crore collection mark and also established Salman Khan and Kareen Kapoor as toppers in Bollywood
For Bollywood, 2011 proved to be a beneficial year, after having witnessed a large number of flops in 2010. Unlike other years, where we see only a couple of big hits and some cult successes, 2011 saw five movies that crossed the Rs100 crore collection mark; and even saw a path breaking niche film become one of the top grosser of the year. But on top of it all, 2011 marked the revival of the small screen.
Till 2010, filmmakers counted on the multiplexes. Lot of experiments happened, but apart for Aamir Khan’s 3 Idiots, none of them paid off. However, taking a cue from the success of Dabaang, some decided to return to the ‘masala’ roots and emerged with flying colours.
The first was Singham, which saw Ajay Devgan back in his action avatar, the genre which had launched and sustained him during the early 1990s before he made a fabulous U-turn with Zakhm. With Singham, he revived his career and that of Reliance Entertainment, which had suffered a massive blow with big-budget flops like Kites and Raavan in 2010. Apart from a huge box office collection of Rs139 crore, Singham’s national television premier was one of the most successful ones, with a TRP of 8.4. It also marked a grand entry of typical ‘south-Indian’ masala blockbusters in Bollywood.
Ajay Devgan in Singham
Next came Ready, which marked the beginning of Salman Khan’s triumph in 2011. Riding high on the success of Wanted and Dabaang, Salman’s movies like Ready and Bodyguard broke all records at the box office. Especially, Bodyguard, which was produced on a budget of Rs60 crore, became the biggest opening day grosser, then highest opening week grosser and with a collection of Rs229 crore, so far became the biggest Hindi box office hit in India. It also beat Singham’s TVR ratings with a TRP of 10.0 to become the most watched over film on Indian television.
Salman Khan with Asin in Ready
Salman Khan became the highest paid actor in Bollywood, rumoured to be now naming Rs50 crore as fees. Bodyguard belle Kareena Kapoor too, became the highest paid actress. She also replaced Aishwarya Rai Bachchan in Madhur Bhandarkar’s upcoming movie Heroine for which she will get a share in its profits, a first for an actress in the Hindi film industry.
Post-Bodyguard, Kareena went on to taste more success with Ra.One, the home production of Shahrukh Khan, which was produced at a cost of over Rs125 crore. The film was released in multiple languages and in 3D and all its formats collected Rs240 crore worldwide. Shahrukh also called as ‘King Khan’ in the industry is now looking forward to Christmas release of his Don2 to reclaim the top spot.
Shahrukh Khan and Kareen Kapoor in Ra.One
The other big winners during 2011, include Farhan Akhtar’s Zindagi Na Milegi Dobara and Rockstar through and through multiplex fares. But it was Aamir Khan’s production Delhi Belly that broke down the barrier between cult and ‘junta’ cinema with a Rs92 crore haul against the production cost of Rs24 crore including filmmaking, distribution and publicity. Delhi Belly was the 7th top grosser of 2011. Apart from that, niche movies like Dhobi Ghat, Shor in the City, The Dirty Picture and Shaitaan also made a mark.
Hritik Roshan and Katrina Kaif in Zindagi Na Milegi Dobara
However, 2011 also saw several unexpected flop movies even from acclaimed filmmakers like Vishal Bhardwaj and Prakash Jha. Veteran actor Pankaj Kapoor’s directorial debut Mausam sank without a trace. Sanjay Dutt starrers like Chatur Singh 2 Stars and Rascals were both critical and commercial embarrassments. Sharukh Khan’s other home production, Always Kabhi Kabhi also made it to the list of flops in 2011.
Sanjay Dutt in Chatur Singh two star
Yet there seems to be one actor who remains unfazed by flops. Akshay Kumar added more to his list of duds with Thank You and Patiala House in 2011, but he has paid an advance income tax of Rs6 crore, the highest in Bollywood for 2012. Katrina Kaif, who starred in Zindagi Na Milegi Dobara and Mere Brother Ki Dulhan apart from her item numbers, has paid Rs3 crore as advance tax, beating the leading lady Kareena, who paid Rs2 crore.
In coming year there are some big releases lined up. The most talked about film Agneepath, will mark the return of Hritik Roshan and Sanjay Dutt. Salman Khan’s Ek Tha Tiger, Aamir’s Dhoom3 and tentatively titled The Act of Murder, Priyanka Chopra-Ranbir Kapoor starrer Barfee and sequels to Krrish, Housefull and Ready are slated for release in 2012.
The Indian government now wants to declare 3G roaming pacts as illegal but kept mum in July while Bharti Airtel, Vodafone and Idea were signing agreements to share 3G spectrum
The ministry of telecommunication has said that mobile operators would not be allowed to offer third generation (3G) service while in roaming across circles. Telecom secretary R Chandrashekhar had said that 3G roaming pacts between telecom operators are illegal and it should be annulled. Although the government has not said anything about imposing penalty for the pact, but if they decide to cancel or disqualify the roaming pact, then it would adversely affect Bharti Airtel, Idea Cellular and Vodafone, say analysts.
“We believe this move would hurt mobile operators providing 3G services. With the implementation of this move, these three companies will lose around 2%-3% of roaming voice revenues,” said KR Choksey in a note.
Earlier in July, Bharti Airtel, Vodafone and Idea Cellular entered into agreements with one another to offer 3G mobile services in circles in which they did not succeed in getting spectrum in the auction held last year. Bharti and Vodafone have won licences in 13 circles while idea has won 11 circles.
According to BRICS Securities, the cancellation of 3G pact between the three companies would have a limited impact on their topline. “If the 3G pacts are cancelled, we do not expect any significant impact on revenues in FY12-13 as the revenue share from 3G services is currently less than 2% and we expect it to remain below 4% till FY13-14 at least. Bharti and Idea have 65% and 74% of their existing customers in 3G circles,” the brokerage said.
Under scrutiny for entering into illegal roaming agreement for 3G mobile services, the Cellular Operators Association (COAI)—the lobby of GSM operators—said that any changes in it would deprive users of enjoying seamless high-speed data services.
COAI, in a letter to JS Sarma, chairman, Telecom Regulatory Authority of India (TRAI), said that prior to the 3G and broadband and wireless auction (BWA), the Department of Telecom (DoT) had made it clear that “the auction is for grant of spectrum and not for grant of licence to provide 3G or BWA services”.
Incidentally, the DoT had also raised doubts over 3G roaming pacts between companies, which do not have 3G services on pan-India basis. In an internal note, the DoT had clarified that a unified access service licence (UASL) cannot offer 3G services, declare a tariff plan or acquire customers in a circle where it has not been allocated 3G spectrum. Under the licence conditions, a licencee providing services has to have its own network, the DoT said.
However, COAI has contended that a Unified Access Service (UAS) License is technology neutral access service license which allows the provision of all type of access services.
Peeved over by the move to ban intra-circle 3G roaming, top executives of Bharti Airtel, Vodafone and Idea Cellular had also written a letter to the prime minister asking the government to refund the money with interest they paid for 3G spectrum. The letter, jointly signed by Sunil Mittal of Bharti Airtel, Kumar Manglam Birla of Idea and Vodafone Group CEO Vittorio Colao, says, “...in the event that 3G Intra-Circle Roaming (ICR) is now deemed impermissible, then, it would be a clear breach of our contract and the pre-auction confirmation given by the government. In that eventuality, we request that our spectrum auction payments be refunded to us with interest (as) compensation for all the capital investment made by us.”
All private telecom companies, excluding state-owned BSNL and MTNL, had participated in the 3G auction process, which went on for 34 days and ended on 19 May 2010. Due to intense competition, no single player could secure the airwaves throughout the nation. BSNL and MTNL were given spectrum nearly a year ago on the condition that they would be paying the amount equivalent to the final bid.
Nine telecom companies, including Bharti Airtel, Vodafone and Reliance Communications (RCom) and state-run MTNL and BSNL paid Rs67,719 crore to the Indian government as 3G spectrum fees.
Bharti Airtel managed to win 3G licenses in 13 out of the 22 circles, which was much lower than the market expectation and the company management’s aim of a pan-India footprint. RCom also successfully bid for 13 out of the 22 circles, but with a predominantly ‘B’ and ‘C’ circle footprint, in addition to the three metros—Delhi, Mumbai and Kolkata. Idea clearly followed the strategy of bidding for circles which account for maximum revenue for the company. In nine out of the 11 circles that Idea has won, it was one of the top three private operators in terms of revenue share. Vodafone managed to be successful in nine circles out of which six are real big guns such as Mumbai, Delhi, Maharashtra, Gujarat, Tamil Nadu and Kolkata.
In order to reduce operating costs, Bharti Airtel, Vodafone and Idea Cellular had already consolidated infrastructure and resources. Together they own Indus Tower, which has a portfolio of over one lakh towers. While Bharti Airtel and Vodafone hold 42% each in Indus Tower, Aditya Birla Telecom (the owner of Idea Cellular brand) owns a 16% stake in the tower company.
The government expect the telecom companies to buy spectrum at current market price. But even if they have to buy the spectrum at the 3G auction prices, it would be too costly for them. If Bharti Airtel has to buy spectrum in the remaining nine circles, where roaming is active, then it would have to shell out Rs4,460 crore, while Idea Cellular would have to pay Rs10,980 crore for 11 circles where it failed to win spectrum during the auction.
While there still appears to be some infighting going on between the government and telecom operators, there is some hope. The draft New Telecom Policy-11 (NTP) mentions a technology-neutral services delivery and spectrum sharing. “If these provisions (of the NTP-11) are implemented, any operator would be able to share spectrum to offer 3G or 4G services. However, the NTP-11 is still in the consultation phase and is not likely to become a reality before FY13,” said BRICS Securities.