Companies & Sectors
RBI relaxes norms for FDI in credit bureaus

The Reserve Bank’s new norms may allow Italian CRIF credit bureau to enter Indian market and also let it take over the cash-strapped and troubled High Mark

The Reserve Bank of India (RBI) has increased the foreign direct investment (FDI)  limit to 74% in credit information bureaus in the country. According to our sources, this move may prove to be beneficial to Italian CRIF SpA to enter Indian market and also take over cash-strapped High Mark Credit Information Services Pvt Ltd (High Mark). The RBI move would also help other credit bureaus in India to procure funding from their promoters from abroad.

At present, investments, directly or indirectly by any person, whether resident or otherwise are limited to 10% of the equity capital of a CIC. However, an investment under the FDI route was permitted up to 49% and any transfer of more than 5% of shares requires approval from the RBI. Similarly, institutional investment in a credit bureau is capped at 10%.

The first exception to this was done to allow UK-based Experian and Equifax Credit Information Services Pvt Ltd (ECIS) enter the Indian market. This new norm from RBI would allow CRIF to enter India and subsequently takeover cash strapped and troubled High Mark. Credit bureaus like Credit Information Bureau (India) Ltd (CIBIL), Experian and Equifax have received funding of around Rs50 crore to Rs75 crore and have access to additional funds through promoter or parent company which are large organisations specialising in credit information business mainly in the US and UK.

Earlier, while admitting that High Mark was looking to raise funds from domestic and foreign investors, its promoter Prof Dr Anil Pandya said, “Only CIBIL has funds. The other two (Experian India and ECIS) are also in the market raising funds. Deep pockets and ample sources of funding do not help because of the regulatory constraints on capital structure of CICs.” ( )

Prof Dr Pandya, who lives in the US, had tried to rope in a foreign rating agency to put in additional capital.

As reported by Moneylife earlier, High Mark was negotiating with CRIF credit bureau for a bailout. High Mark was offered Rs30 per share by CRIF, which is also an existing shareholder in the credit bureau. CRIF SpA owns 9.09% stake in High Mark. We learned that CRIF executives had already met senior executives of RBI to assure them of support and continuity after takeover. However, the banking regulator, because of its reservations about CRIF’s ownership pattern, rejected the proposal.

Experian India, one of the four credit information companies (CICs) in India, was in talks with High Mark and reportedly had also completed the due diligence process. According to the sources, Experian had increased its bid to Rs27 from Rs25 to buy minimum 26% stake in troubled and cash-strapped High Mark. Reportedly, there is not much progress on this front as well.

High Mark was negotiating with other credit bureaus to do an asset sale, including 250 million records collected from member institutions, says a complaint filed by a former employee of the credit bureau to the finance minister, RBI governor D Subbarao, secretaries from the finance ministry and financial services.

High Mark, the only bureau started by individuals, has been under severe financial stress following the exit of several of its top managers and the failure of its rights issue.

In October 2013, High Mark appointed Steven Pinto as its new non-executive chairman.
High Mark also promoted Kalpana Pandey, its chief technology officer as whole-time director on its board and chief executive of the credit bureau. This was done following several complaints and reports by Moneylife, the RBI was understood to have directed Prof Dr Anil Pandya to step down as executive chairman of High Mark. ( )

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India GDP growth to be less than 5% by March 2014: Nomura

Nomura expects India GDP growth to bottom out at 4.5% to 5% and expects GDP growth to pick up post elections

India’s gross domestic product (GDP) should pick up further to around 5% during the fourth quarter to end-March on on a continued push from the bumper summer crop and strong exports, says Nomura, in a research report.

“However,” it said, “we expect growth to moderate again in first half of 2014 to around 4.5% by Q2 2014, on account of the anticipated sharp cutback in government spending in Q1 2014 and delay in capex activity due to political uncertainty.”

Nomura also expects the Indian government cutbacks to happen prior to the Indian elections and are cautious about their forecast due to political uncertainty.

India GDP grew 4.8% in the third quarter of the 2013 calendar year, which was above consensus expectations of 4.6% (Nomura expected it to be 4.7%), on account of good agricultural product and improvement in power, financial services and infrastructure sectors. However, much of the GDP growth improvement was driven by export growth (thanks to a weak rupee) and cutback in government spending.

“On the demand side, better net exports and marginal improvement in private consumption and investment offset lower government spending. GDP at market price rose 5.6% y-o-y in Q3 of which net exports contributed four percentage points (70% of the overall growth),” the note said.

Nomura believes that India’s GDP growth is bottoming out this quarter at 5%, and expects export growth to pick up after the Indian elections, once a government has been formed. “GDP growth is still bottoming out in the 4.5-5.0% range and we expect a more sustained growth uptick after Q3 2014 once political stability has been established and aided also by steady export growth. We expect GDP growth to average 4.7% y-o-y in FY14 (year-ending March 2014), down from 5.0% in FY13, before it picks up again to 5.0% in FY15,” Nomura concluded.

For other economy-related reports, do check out this link.


Nifty, Sensex end the week on a bullish note

The week was characterised by erratic movement in the stock market at the start, and a strong finish, with improved sentiment

Last week, we had suggested that this week (25th to 29th November) would result in a weak rally. The Sensex and Nifty did indeed rally this week, but ended on a strong note. The sentiment has improved over the previous week, though there is a persistently poor macro data that is preventing the market from hitting new highs. India’s GDP grew at 4.8% against polled forecast of 4.6%. Inflation concerns still abound though. The BSE 30-share Sensex rose 574.54 points (or 3%) to close the week at 20,791.93, while the Nifty closed at 6,176.10, up 180.65 points (or 3%).


Initially, on Monday, the markets shot up, without any semblance of fight from the bears mainly because of very positive international news that Iran and US has reached a nuclear deal to restrict Tehran’s nuclear ambitions. This helped ease geopolitical concerns over the Middle-East, and opened up avenues of importing natural gas and other resources from Iran, with fewer restrictions. Both oil and gold fell on the news. The bulls took hold.


The markets reversed on Tuesday. Even though Nasdaq hit 4,000 for the first time since 2000, and other US indices hit another record high, the market never crossed Monday’s high. The bears wrestled back control from the bulls.


Wednesday’s trading session was characterised by dull trading. In the end, there were no eventual winners, with the markets finishing flat, despite positive economic data from the US.


Thursday being the day of derivatives expiry volatility was expected to be high. The markets remained strong, well above key support levels. The optimism was driven by Japan’s Nikkei hitting a six-year high, as well as positive numbers from the Euro region. The markets finished up. There was a possibility of the gains extending well into Friday.


Indeed, Friday saw major gains. There was hardly any fight from the bears, as the bulls took over and kept the market steady and strong throughout the trading session. There is the possibility of a further rise on Monday. We expect the market to give up some gains either late Monday or on Tuesday.


Among the 1,279 shares that traded on the NSE this week, 780 rose, 458 fell and 41 remained unchanged.


Among the other indices on the NSE, the top two indices were PSU Banks (5%) and CNX Midcap 50 (4%) while the top two losers were Pharmaceuticals (0.80%) and CNX IT (0.40%).


Among the Nifty stocks the top five gainers were Jaiprakash Associates (16%); BHEL (14%); L&T (8%); ONGC (8%) and Axis Bank (7%), while the top five losers were Bharti Airtel (-3%); NTPC (-2%); Wipro (-1%); Cairn (-1%) and Asian Paints (-1%).


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