Personal finance Thursday

DSP BlackRock MF extends NFO closure period for DSP BlackRock FMP-3M-Series 21; Max Bupa launches Family First Health Insurance Plan to provide cover to extended families; HDFC Mutual Fund unveils HDFC FMP 100D September 2010 (4); Toyota Kirloskar Motor raises prices of three models

DSP BlackRock MF extends NFO closure period for DSP BlackRock FMP-3M-Series 21

DSP BlackRock Mutual Fund has extended the closing date for the new fund offer (NFO) of DSP BlackRock FMP-3M-Series 21, a close-ended income scheme to 6th October.

DSP BlackRock FMP-3M-Series 21 is a close-ended income scheme. The Scheme has a maturity of three months from the date of allotment. The investment objective of the Scheme is to seek capital appreciation by investing in debt and money-market securities. The Scheme will invest only in securities which mature on or before the date of maturity of the Scheme. The Scheme may also use fixed-income derivatives for hedging and portfolio balancing.

The Scheme offers two options-growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The minimum investment amount is Rs10,000. Dhawal Dalal is the fund manager. CRISIL Liquid Fund Index is the benchmark index.

Dhawal Dalal, senior vice president & head-fixed income, DSP BlackRock Investment Managers, says, "We hope to collect around Rs250 crore from the NFO."

Max Bupa launches Family First Health Insurance Plan to provide cover to extended families

Max Bupa Health Insurance has launched ‘Family First Health Insurance Plan’ under which customers can choose a cover for their extended families, in addition to their spouse and children.

Family First is a health plan designed keeping in mind the health insurance needs of the Indian joint families, where the customers can choose a cover for not just their spouse and children, but also for their extended families, including parents, grand-parents, in-laws and grand children. The plan provides flexibility for families to decide their optimal cover based on their needs. They can choose a sum insured per person (one amount chosen for all family members), as well as a floating amount for the entire family that can be utilised once the sum assured per person is consumed.

Max Bupa Health Insurance is a joint venture between Max India and the UK-based Bupa. While Max India holds 74% stake in the company, Bupa has 26% in the joint venture.

According to Dr Damien Marmion, Chief Executive, Max Bupa, the Family First policy offers its policyholders benefits such as any age enrolment, lifetime renewal and cover for expenses including in-patient treatment, pre- and post- hospitalisation along with access to health advice and health checkups. Under Family First the plan also includes maternity benefits wherein the policyholders can make up to two claims over the policy lifetime.

He adds, “Consumers can decide upon a sum insured per person (one amount chosen for all family members) as well as a floating amount for the entire family that can be utilised once the sum assured per person is consumed.” The Policy offers individual sum insured options ranging from Rs1 lakh to Rs5 lalh and family floater sum insured options ranging from Rs3 lakh to Rs15 lakh. And all members of the family covered under the plan do not necessarily have to be in the same location, so in cases where parents /parents in law/ grandparents or children are in different cities (across India) they can still be covered by the same policy. 

HDFC Mutual Fund unveils HDFC FMP 100D September 2010 (4)

HDFC Mutual Fund has launched HDFC FMP 100D September 2010 (4) under HDFC Fixed Maturity Plans-Series XIV. The Scheme is a close-ended income scheme. The investment objective of the Plan under the Scheme 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 Scheme will offer growth and dividend (payout) option. The Plan will have the maturity period of 100 days. The Plan will invest 60%-100% of assets in debt and money-market instruments and the remaining in government securities.
The Plan opens on 30th September and closes on 6th September. The exit load for the Plan 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. CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Anand Laddha are fund managers.

Toyota Kirloskar Motor raises prices of three models

The Indian unit of Toyota Kirloskar Motor will raise prices of three key models from 1st October. The models are Innova, Corolla Altis and Fortuner by up to 1.5%.
The company has not provided any reasons for the increase. The price rise will range from Rs10,000 to Rs17,000 for the Innova and Rs10,000 to Rs14,000 for the Corolla. The price of the Fortuner has been increased by about Rs29,000. Toyota produces the Corolla, Innova and Fortuner at a factory outside Bangalore. It also markets the imported Land Cruiser, Camry, Prado and Prius models.


SC sets aside high court order on transfer of debts between banks

New Delhi: The Supreme Court today set aside a Gujarat High Court order that prohibited banks from transferring debts, including non-performing assets (NPAs), to one another, reports PTI.

A three-judge bench headed by Chief Justice S H Kapadia held that the transfer of debts between banks is legal and the Banking Services Regulation Act allows this activity.

"There is nothing to prohibit under the banking regulation act... We set aside the judgement of the high court," the bench said.

The apex court judgement came in response to a clutch of petitions filed by major banks, including ICICI Bank, Kotak Mahindra Bank and StanChart, challenging the Gujarat High Court judgement.

The case relates to the transfer of a basket of NPAs by ICICI Bank to Kotak Mahindra Bank along with underlying security interest.

One of the borrowers, APS Star Industries, objected to the transfer and the matter landed in court.

A division bench of the Gujarat High Court held that the Banking Regulation Act did not allow for trading in debt.

Had it not been overturned, the high court judgement would have serious implications for the nascent securitisation business, which relates to buying of a pool of debts by one bank from another and trading in them.


Satyam: A long, long way to go...

It is going to take longer than most analysts estimated for Satyam to say ‘all is well’, specifically, at least 18 months

After hitting a 52-week low of Rs78.55 on 31st August, Satyam's share price rose up to Rs114 on 23rd September on hopes of a speedy merger and good results. However, investors were in for a disappointment as restated financials only indicated that the road to recovery for this troubled company is going to be longer than initially expected. Satyam estimates that it will take at least 18 more months to fully convalesce.

A note from Kotak Institutional Equities Research today says, "Satyam faces multiple challenges, including operating with a reduced addressable market, lack of competitive differentiation, loss of quality client base, reduced management bandwidth and high attrition. The new management has done a creditable job in holding the organisation together, but we believe a meaningful turnaround is some time away."

What Satyam disclosed yesterday is this: revenues of Rs54.8 billion in FY10, EBITDA margin of 8%, net loss of Rs1.2 billion after including extraordinary items of Rs4.2 billion [relating to severance compensation for employees (almost Rs1 billion), forensic investigation expenses (Rs1.1 billion), and write-down in value of assets of subsidiaries (Rs2.2 billion)], cash and cash equivalent of Rs22 billion as of 31 March 2010 (but Rs19 billion after payout for the Upaid dispute) and accumulated losses of Rs27.5 billion.

The balance sheet impact of the fraud committed by Raju has been about Rs69 billion. Satyam had just 27,000 employees at the end of FY10 and plans about 3,000 campus hires this year. However, it is still unclear about hiring at a senior level for 2010.

In a televised interview, Vineet Nayyar, chairman; CP Gurnani, CEO and S Durgashankar, CFO of Mahindra Satyam disclosed that its main revenue contributors are US (2/3rd) and Europe (15%-20%).

The market is disappointed that it did not disclose whether there will be a tax shield available on accumulated losses, some details of FY10 such as Q4 revenue run rate and margin and details on any operational metrics.

Brokerage reports after Satyam's disclosures are far from euphoric. CLSA's note to its institutional clients today says, "Through the last 15 months, we have been advising investors to stay away from the Satyam-Tech Mahindra combine. Satyam's reported financials for FY10 do nothing to change our view." It talks about five key truths which will drive investment decisions in Tech Mahindra-Satyam in the future - Satyam's FY10 revenues are not representative of its future revenues. CLSA expects 2HFY10 revenues to be lower than 1H as clients who initially did not pull out subsequently cancelled contracts. FY11 revenues are likely to be lower than FY10 because it could not participate in a lot of deals because its financials were not ready and the company had high attrition creating supply side pressures. CLSA believes Satyam will trail industry revenues in FY12 as well as IT services is a 'game of scale' and Satyam is lagging behind too much.

A merger with Tech Mahindra may not change things much feels CLSA - "While a merger with Tech Mahindra does give Satyam some scale, it does not give it the muscle to compete with larger peers in sectors outside telecom." Satyam's margins will improve going forward but not rapidly as it will have to make pricing compromises to win deals. "Risk-reward is favourable neither in Satyam nor in Tech Mahindra," concludes CLSA.

CLSA's bull case estimates for Satyam are revenue at $1.2 billion or Rs54.6 billion in FY11 and $1.4 billion or Rs62.8 billion in FY12 and EBITDA of Rs7 billion and Rs10.4 billion - CLSA assumes margins doubling in two years. Assuming a tax rate of just 5% it will earn a profit of Rs6.2 billion and Rs9.7 billion. Kotak estimates FY11 and FY12 revenues at $1.1 billion and $1.3 billion and profit at Rs5.9 billion and Rs6.3 billion, based on the assumption that FY11 revenue growth will be -5%, FY12 at 22%, FY11 employees at 31,050 and FY12 at 36,329, employee additions at 4,050 and 5,279 and utilisation rate at 77% after being at 68%.

The Kotak report points out a couple of challenges that Satyam faces - it says that Satyam's $800 million revenue loss from 150 clients implies that it lost $5 million of revenue per customer. This is high compared with its current revenue per client at $3.3 million. The second big challenge is the loss of almost its entire management team. Kotak says, "We understand that only four members of the 42 key members of the senior team of Satyam are still with the company."

(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).




6 years ago

A large segment of the old time infotech companies were scoring major benefits from property valuations and tax benefits. "Software" was largely over-priced export to the US, based on code coolie stuff "cheaper than USA" rather than based on value. There is some sort of major correction about to take place in the Indian infotech industry, and valuations will be primary, as will salaries. Satyam/Mahindra are probably markers - and don't forget the adverse publicity Mahindra is getting in the US on the automobile dealership issue - automobile dealers are a very strong lobby with immense PR skills.

R Balakrishnan

6 years ago

It is looking like Satyam is causing indigestion to Mahindras. Terrible results. Merger will not solve anything, except maybe make the shrinking look less visible.

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