New Delhi: In a surprise move, incumbent Securities and Exchange Board of India (SEBI) chief CB Bhave is being considered for extension in service by a high-level search panel that was set up to find his successor at the market regulator, reports PTI.
Mr Bhave took charge as SEBI chairman on 18 February, 2008 on a three-year term. However, the terms of chairman and whole-time directors at SEBI have been increased to five years since then. Similarly, the terms of Reserve Bank of India (RBI) and insurance watchdog Insurance Regulatory and Development Authority’s (IRDA) chiefs have also been increased to five years.
Despite this, the government in September this year set up a high-level committee headed by Cabinet secretary KM Chandrasekhar to find a successor to Mr Bhave whose term ends in February 2011.
At that time, it was said that the government did not want to extend Mr Bhave's term to five years in the wake of a public spat between Sebi and IRDA.
The search panel has already conducted initial rounds of interviews. The panel at the last moment deferred the final round that was scheduled to be held on 3rd December.
Sources close to the development said that Mr Bhave's name is now being considered by the panel after some top policy makers asked why Mr Bhave, like other regulators, could not be given a five-year term,
Besides, pull-out by some candidates nominated by the search panel from the process also led to the committee considering giving Mr Bhave a two-year extension, which if given will give the incumbent SEBI chairman time till February 2013.
Sources said there are some procedural problems in giving Mr Bhave a direct two-year extension, as the process has been in place to find his successor and the search panel can not simply ignore already short-listed candidates for the coveted job.
Therefore, the panel in most likelihood would consider Bhave as one more probable candidate for holding the position of SEBI chairman 18 February, 2011 onwards, they added.
The panel is likely to hold its next meeting on 21st December which could be its final meeting and wherein it could decide on the name of next SEBI chief after deliberating on all the short-listed candidates, including Mr Bhave.
Until Mr Bhave's name came up for the panel's consideration, those tipped to be leading the race included mutual fund industry body Association of Mutual Funds in India’s (AMFI) chairman, UK Sinha, and corporate affairs secretary R Badyopadhyay.
The panel, which also includes finance secretary Ashok Chawla, financial services secretary R Gopalan and Department of Personnel secretary Shantanu Consul as members, last met in early November to decide on the final list of candidates.
The panel considered about 20 persons and zeroed in on seven candidates at its last meeting, but some of them have opted out since then. Furthermore, reservations have been expressed about a couple of them by senior policymakers and regulators.
Out of those selected for the final interviews, at least two—public sector lender SBI chairman OP Bhatt and RBI deputy governor K C Chakrabarty—expressed their unwillingness for the position, sources said.
Others short-listed for the final interview include Department of Disinvestment additional secretary S Pradhan, Madhya Pradesh principal secretary GP Singhal and two managing directors at SBI, SK Bhattacharya and R Sridharan.
Incidentally, both Mr Bhatt and Mr Chakrabarty, as well as UK Sinha, were nominated for the role of SEBI chairman by the selection panel, while all other candidates submitted applications for the coveted post.
The committee was also considering calling a couple of more candidates other than those already short-listed and one such person could be KP Krishnan, who is currently secretary of the Economic Advisory Council to the Prime Minister and was formerly a joint secretary, Capital Market Division in the finance ministry.
Mr Krishnan has previously served as a member on SEBI's board, while Mr Bandyopadhyay is currently on the SEBI board.
Among the probables, Mr Krishnan and Mr Sinha have been a part of various committees formed by SEBI and the finance ministry for capital market regulation.
Introducing a new section by Sucheta Dalal on how media is often party to stock price...
Enam estimates private consumption will soar to $3.6 trillion by 2020 from the current $790 billion; median household income will rise to $8,000 per annum from the current $3,400; and 40% of Indian households will be in the middle and upper middle classes
In a detailed report released late November, Enam says that India is entering the hyper-growth phase. Three factors-the income effect, demographic dividend, and propensity to spend-will propel private final consumption to $3.6 trillion by 2020 from the current $790 billion. This forecast implies that the average household income will double and the number of people in the middle and upper-middle classes will also double to 110 million, with their propensity to spend rising exponentially, driven by a fall in the dependency ratio, rapid urbanisation, rising income levels and the ability to leverage.
Since it is the middle class that will drive higher consumption, Enam concludes that categories with low levels of penetration and high middle class appeal will have the highest growth; this means automobiles, consumer durables, processed foods, personal care, mortgage, decorative paints, media, organised retail, and real estate sectors will flourish.
Enam stresses that unless 'enablers' are present, the prospective consumerism may falter. These enablers include employment, development of education and skill sets, infrastructure (electricity, roads), and more importantly financial inclusion, which means more credit reach or loan availability to people.
Based on these arguments, Enam lists the following as its top picks over the next five years as Voltas, Bosch, Sobha Developers, Pantaloon, Dish TV, HDFC, Maruti, Shoppers Stop, Exide, Titan, Asian Paints and Nestle.
The report says that "brands that will capture the imagination of the middle class will be relative winners." It lists a chart where global brands such as Thomas Cook and Cox & Kings currently cater to the upper-middle class in travel and tourism, whereas Kesari caters to the middle class. Or where Kwality Walls caters to the upper-middle, Amul caters to the middle. It says that the size of the pie, both at the top and bottom of the pyramid, is large.
Enam believes that focusing on the middle class does not necessarily mean low EBITDA and RoE for companies; some examples are Maruti, Bajaj, Bajaj, Dabur, Jyothy Labs. It also gives a chart listing the top 10 wealth creators in the consumption space in the past five years that have a significant exposure to the middle class-these companies include UniTech, Shriram Transport, United Spirits, Asian Paints, HDFC, Nestle, Hero Honda, Maruti, ITC and Tata Motors.
The report draws comparisons between the US in the 1960s, China in the mid 1990s and India now. It says that a demographic shift (increase in the working population and a lower dependent population) led to a rise in per capita income and disposable surplus in the US in the late 1960s. Urbanisation and changing values (spending versus saving) fueled rapid discretionary spending. All this translated into high growth in companies with highest exposure to discretionary spending-such as personal care, housing, healthcare, food, tobacco, etc. In the case of China, while the size of the working age population remained the same, the dependent population fell dramatically leading to a huge acceleration from the mid 1990s. Enam believes that India has entered its 'window of opportunity' with the dependency ratio set to fall from 58% to 49% in the next 10 years. India's working class population today is as large as China's in 1995.
It gives some interesting statistics: Nearly half of India's population will be urban by 2025-today, India's 30% urban population produces 44% of its income; every job created in the IT-ITES sector creates four additional jobs in the rest of the economy; financial inclusion should create huge job opportunities in the BFSI space itself.
Enam talks about 'auxiliary enablers' which also lead to rapid growth. These include rising affordability-for example, the price of a car, Hyundai Santro has actually fallen from Rs3,00,000 in 2000 to Rs2,77,000 now; prices of other products such as motorcycles, TVs, cell phones, air-conditioners, have also fallen; availability has increased due to higher distribution reach, and awareness is rising because of rising literacy levels and penetration of the cable network.
The areas where Enam expects massive growth are also areas where penetration is the lowest in India currently. These include skin creams, fruit beverages, health supplements, deodorants, two-wheelers, DTH, DVD players, automobiles, PCs, air-conditioners, insurance, mortgage, organised retail, e-learning, and home internet access.
(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife)