Personal finance Monday

Birla Sun Life MF unveils Birla Sun Life Fixed Term Plan-Series CF; HDFC Mutual Fund floats HDFC FMP 35D September 2010 (2); Citibank launches credit card for frequent flyers; Allahabad Bank increases base rate to 8.5%; Indian Bank hikes deposit interest rates on shorter maturities

Birla Sun Life MF unveils Birla Sun Life Fixed Term Plan-Series CF

Birla Sun Life Mutual Fund has launched Birla Sun Life Fixed Term Plan-Series CF, a close-ended income scheme. The Scheme seeks to generate income by investing in fixed income securities maturing on or before the duration of the scheme. The Scheme opens on 4th October and closes on 6th October.

The scheme has duration of 367 days from the date of allotment. The Scheme offers growth and dividend (payout) option. The exit load for the Scheme is nil. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The minimum investment amount is Rs5,000. The minimum target amount under the Scheme shall be Rs1 crore during the NFO period. CRISIL Short Term Bond Fund Index is the benchmark index. Kaustubh Gupta is the fund manager.  

HDFC Mutual Fund floats HDFC FMP 35D September 2010 (2)

HDFC Mutual Fund has launched HDFC FMP 35D September 2010 (2), under HDFC Fixed Maturity Plans-Series XV, a close-ended income scheme. The investment objective of the Plan is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the Plan. The Plan will invest 60%-100% of assets in debt and money-market instruments and the remaining in government securities.
During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The new issue will close on 6th October. The exit load for the Plan is nil. The minimum investment amount is Rs5,000. CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Anand Laddha are the fund managers.

Citibank launches credit card for frequent flyers

Citibank has launched a new credit card that will give frequent flyers the chance to earn mileage points when they fly on more than 50 domestic and international airlines. Till now, air travellers could only accumulate mileage points by flying on a single airline.

The Citibank PremierMiles Credit Card offers frequent flyers a 'universal' mileage platform that enables them the unique freedom and flexibility to earn miles on their travel on over 50 domestic and international airlines. The key benefit of the credit card is that it frees customers from having to choose one airline loyalty programme over another. The card offers a superior earn rate of 10 PremierMiles per Rs100 on all airline spends and a preferential interest rate. With an annual fee of Rs5,000, card members will receive a first-year activation bonus of 5,000 PremierMiles.An annual spending of Rs4 lakh in a year earns cardholders a bonus 2,500 PremierMiles. All non-airline purchases on the card earn customers 2.5 PremierMiles for every Rs100 spent.

Allahabad Bank increases base rate to 8.5%

Allahabad Bank has increased its base rate to 8.5% from 8%. The Bank has raised its base rate by 50 basis points. The revised base rate will be applicable to all loans which are linked to the base rate. The existing borrowers, who are continuing under benchmark prime lending rate system and wish to switch over to this system of base rate before expiry of their contracts, can do so through their respective branches at no extra charge. Base rate is the minimum rate of interest that a bank is allowed to charge from its customers. Unless mandated by the government, Reserve Bank of India rule stipulates that no bank can offer loans at a rate lower than base rate to any of its customers.

Indian Bank hikes deposit interest rates on shorter maturities

Indian Bank has increased its deposit interest rates by 50 to 75 basis points on shorter maturities. The Bank had increased the rates for deposits above two years to 7.75% in August. It has also increased the base rate to 8.5%. The agricultural sector under interest subvention scheme and the Bank's special schemes under poultry and fisheries would be protected from the increase. Loans to micro industries were also exempted partially.


CLSA says BPCL’s Bina project to give poor returns

In today’s report to its institutional clients, CLSA says BPCL’s Bina refinery needs $9.5/bbl GRMs to report net profits and while it will open in Q4FY11, it will break even only by FY14; Bina is a case study of deteriorating refinery economics, it believes

BPCL's Bina refinery, which is located in the heart of India, i.e., Madhya Pradesh, will process 120kbpd of crude. BPCL and Oman Oil own 50% each in this project which will become one of the most complex refineries in India. CLSA expects it to earn a premium to Singapore Complex GRMs. Bina will process 65% Arab-Light and 35% Arab-Heavy crude that will be delivered to it via the 935km Vadinar-Bina pipeline. BPCL is almost done with the Rs10.5 billion Bina-Kota product pipeline and marketing terminal at Bina to handle, store and evacuate products from Bina.

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However, the project, while grand, is definitely one of the steepest in terms of costs. CLSA says in its report today, "The budgeted cost of Rs114 billion makes Bina one of the most expensive new-builds globally at $2,319/complex-bpd. The high project cost will still reflect in high capital charges with ~$3.5/bbl of interest expenses and ~ $3.5/bbl of depreciation charges. Together with the opex ($2.5/bbl, we assume pet-coke credit in GRMs), Bina will require $9.5/bbl in realised refining margins to report a net profit." The Bina project is already facing delays, partly because of a delay in the 3x33MW Rs9.5 billion pet-coke-based captive power plant that BHEL is constructing for Bina. CLSA expects the six-month delay to add a further 5%-10% to project costs.

Net-net, BPCL is earning a 24% return on its equity investment in the project, according to CLSA's calculations. The brokerage assumes a terminal realised margin of $10/bbl (a $4/bbl premium to the assumed Singapore margin of $6/bbl) and 13.5% cost of equity and pegs the project's March 2012 fair equity value at Rs46 billion or Rs13.5/Bina-sh. BPCL's equity investment was at an average price of Rs10.9/Bina-sh (post IPO). However, the brokerage is not impressed with these returns. The reason, it point out, is that these returns come six years after Bina was revived in FY07 implying only a 7.4% IRR which slips to an even poorer 7% if you take in the debt BPCL extended to Bina.

"Bina is a case study of deteriorating refinery economics even as BPCL looks to add another 15MT in refining capacity over the next five years," the brokerage says.

The Bina IPO may come out in FY12 which will allow the project to retire some of the debt it owes to BPCL. Both BPCL and Oman Oil have put in Rs 17 billion each in equity into this project. After the IPO, BPCL may own 49%, Oman Oil could own 26% and other investors the rest. CLSA points out that Bina's capital cost is twice as much as Reliance Petroleum. Even adjusted for off-sites, utilities and financing costs, Bina is 44% more expensive than RPET.

CLSA also points out in the report that Singapore margins remain below mid-cycle levels and that it expects complex refining margins to remain subdued for the next few years.

(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).


India implements FTA on goods with Indonesia

New Delhi: Taking its free trade agreement (FTA) with the 10-nation Asean bloc a step further, India has implemented a free trade pact with Indonesia that slashes import duties on thousands of products, like seafood, chemicals and apparel, reports PTI.

In turn, Indonesia will also slash import duties on Indian goods.

Now that the trade pact with Indonesia has come into force, the agreement signed with the Association of Southeast Asian Nations (Asean) bloc in 2009 has become functional with six member countries.

Besides Indonesia, the other five countries with which India has operationalised FTAs are Vietnam, Myanmar, Malaysia, Singapore and Thailand.

While India and the Asean grouping signed a Free Trade Agreement (FTA) on goods in August, 2009, it was to be separately notified by New Delhi for each member country.

The notification bringing the FTA with Indonesia into force from 1st October was issued by the Central Board of Excise and Customs (CBEC).

A commerce ministry official said FTAs with the remaining four Asean members of Asean — Brunei, Cambodia, Laos and the Philippines — are also expected to become functional in the coming months.

Indonesia accounted for $11.7 billion out of total bilateral trade of $44 billion between India and Asean countries in 2009-10.

India and Asean are also engaged in negotiations to broadbase the FTA by liberalising the services and investment regime.

Commerce ministry officials said talks for the proposed pact on services and investments were at an advanced stage.

Prime minister Manmohan Singh is scheduled to visit Vietnam to participate in the India-Asean Summit later this month.


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