Reliance Capital said that both Sumitomo and Nippon would have 4%-5% stake each in the proposed bank, subject to regulatory approvals
Readying itself for a bank licence, Anil Ambani-led group's Reliance Capital today said Japan’s Sumitomo Mitsui Bank and Nippon Life would become its strategic partners in the proposed banking venture, with each having 4%-5% stake.
Reliance Capital, which is present in a host of non-banking financial services businesses, would be the main promoter of the proposed bank, the application for which would be soon submitted to RBI, the company said in a statement.
Sumitomo Mitsui Trust Bank is one of the largest banks in Japan, while Nippon Life Insurance is among Asia’s largest financial services company and already has strategic stakes in Reliance Capital’s life insurance and mutual fund units.
With the latest move, Reliance Capital joins a host of other entities having firmed up their plans to seek a banking licence, for which applications need to be submitted by 1st July with the Reserve Bank of India (RBI).
There are reports that Tatas are also among the interested candidates, while Mahindras have dropped their plans to seek a bank licence.
Reliance Capital said that both Sumitomo and Nippon would have 4%-5% stake each in the proposed bank, subject to regulatory approvals, while agreements to this effect have been signed with them.
“Sumitomo Mitsui Trust Bank is amongst the largest banks in Japan and the largest institutional investor in the country,” Reliance Capital CEO Sam Ghosh said, while adding that it would bring in vast experience in retail and institutional banking to the new venture.
Sumitomo has total assets of $400 billion, advances of $238 billion and net assets of $25 billion.
Nippon Life, also known as Nissay, is Japan’s largest private life insurer with revenues of $71 billion, profits of $2 billion and it is also present in a host of other Asian countries and in North America and Europe.
Reliance Capital, the financial services arm of Anil Ambani-led business conglomerate Reliance Group, is present in insurance, mutual funds, brokerage, investment banking and a host of other financial services sectors.
Reliance Group also interests in telecom, power, infrastructure, media and entertainment, among others.
If a fund house is interested in just a targeted audience like HNIs or corporates they can create a PMS or Alternative investments Fund, no need to participate in the MF industry, said SEBI chairman UK Sinha
For the first time market regulator Securities and Exchange Board of India (SEBI) admitted there are non-serious players in the mutual fund (MF) industry. “The top 10 asset management companies (AMCs) manage around 77% whereas the bottom 10 players account for just 1% of the industry’s assets under management (AUM). This just shows that there are several AMCs which are not serious about their business. There is a strong need for improvement,” UK Sinha, chairman of SEBI, pointed out.
He was speaking at “National Mutual Fund Summit 2013” organised by the Confederation of the Indian Industry (CII) in Mumbai.
Mr Sinha said, “There is a need for a new (mutual fund policy) one. The (new) policy should dis-incentivise non-serious players. The bar should be raised for new players in the industry. AMCs would need a capital requirement. Many would say why more capital is required. AMCs manage funds so there is no need for capital. However, if a fund house is serious they would use the capital to invest in growth of the business. If a fund house is interested in just a targeted audience like HNIs or corporates they can create a PMS or Alternative investments Fund, no need to participate in the MF industry.”
The SEBI chief also mentioned that it has set up a committee to analyze the performance of AMCs and it would be submitting the report in next two-three months. Based on the report, SEBI would decide on what steps to take, he said.
SEBI had mandated that AMCs on a regular basis mention steps they are taking to increase mutual fund penetration. “Over the past few months, just 52 branches have been set up by fund companies. AMCs have a total of around 1,600 branches. Compare this to insurance sector, where a big insurance company set up around 300 branches in a single day,” he said.
Direct schemes seemed to have a positive impact, claimed Mr Sinha. From share of 12% AUM in December 2012, it has increased to 28% in May 2013. Of this direct equity share has gone up from 7% to 8% and direct debt has increased from 31% to 45% over the same period.
On the lack of penetration of mutual funds, HN Sinor, chief executive of the Association of Mutual Funds in India (AMFI) mentioned that the total number of folios in postal savings schemes is much more than that of the total folios of the MF industry.
The SEBI chairman mentioned that there would be a single SRO (self-regulatory organisation) for mutual funds. The cut-off date for receiving applications for SROs would be 31 July 2013. The AMFI chief mentioned that it is in the process of completing the formalities for setting up the SRO. The new organisation would be known as Institute of Mutual Funds in India.
A Balasubramanian Chairman-CII Mutual Fund Summit 2013 and CEO BSL AMC, mentioned that retail folios in the debt segment increased by 13% whereas in the equity segment retail folios declined by an equivalent number of 13%.
While Yash Birla is being portrayed as mourning over the loss of his private retreat near Kedarnath, there are thousands of small investors including senior citizens, doing the same for investing in his group companies in either stocks or FDs. After all, what can you expect from a head honcho known more for his lifestyle than business moves
Industrialist and Page3 regular Yash Birla is sad over the loss of his private retreat near Kedarnath, according to a Mumbai Mirror report, although the report tries to spin a story of how his heart is bleeding for those who lost their lives and property. However, both Mr Birla and the Yash Birla Group companies are silent about returning money worth about Rs100 crore, invested as fixed deposits (FDs), to small investors.
What is surprising is that while the devastation of Mr Birla’s private property and his bleeding heart have received front page ‘sympathetic’ coverage, there is not a single word about the sufferings of his investors, including several senior citizens, in other media except Moneylife. (Read: Yash Birla Group companies in deep trouble?)
As of March 2012, Yash Birla group companies owe Rs97.25 crore to small investors invested as fixed deposit. Birla Power Solutions owes the highest, Rs57.92 crore while Zenith Birla (India) owes Rs33.19 crore to FD holders. Birla Cotsyn (India) and Shloka Infotech have collected FDs worth Rs5.67 crore and Rs52.84 lakh from investors as of March 2012. Yash Birla group companies have not yet published reports for end-March 2013.
The report in Mumbai Mirror quoted Mr Birla as saying, “the house, named Ashok Vatika after the garden in the Ramayana, was a place of peace and meditation. It is now flattened and there is just barren land left. But I will rebuild it as soon as I can.”
The report further says Mr Birla is “a fitness enthusiast, partygoer, art collector, and trekker is intensely interested in religious and spiritual matters.”
A simple search on Google shows Mr Birla, a corporate honcho, is happier in the company of Bollywood stars than India Inc. He is more known for his lifestyle than business decisions or corporate moves. This is in contrast with other members from the Birla clan like Kumar Mangalam Birla, who is more in the news for his business moves and not for attending parties.
Yash Birla is one of the regulars on the Page3 of newspapers along with his wife Avanti. This may have helped him to get prominent coverage about the devastation of his private retreat in the media. The report tries to paint Mr Birla as a victim of the tragedy.
According to the report, the retreat called as Ashok Vatika was constructed four years ago as an extension of a dharmasala set up by Sunanda, mother of Yash Birla. In 1990 his father Ashok Vardhan, mother Sunanda and sister Sujata died in a plane crash.
Even considering the loss of his private retreat, there is however, not a single word about the huge debt he or his companies have. The Yash Birla Group of companies has been struggling, if the share price is anything to go by. Out of the eight companies, all but one gave negative returns since 1 March 2013.
Moneylife Foundation has been receiving complaints from its members that they are not receiving their fixed deposit maturity amounts from two Yash Birla Group companies namely Zenith Birla (India) and Birla Power Solutions. Birla Power had problems in paying tax dues as well.
Colaba resident Nandini Suchde has filed a first information report (FIR) for cheating to the tune of Rs2 crore against Mr Birla, his wife Avanti, and employees of Birla Power Solutions like PB Murthy, Anant Vardhan Pathak, Ashish Mahendrakar and Tushar Dey, says a report from Mid-Day.
According to the report, Ms Suchde claims that in the last three years, she invested nearly Rs5 crore in Birla Power Solutions, a Yash Birla Group entity, on an assurance of 2% interest per month.
What is surprising in this news report are the claims made in the statement from Yash Birla group advisor OP Jain. As per the Mr Jain, the investor (Ms Suchde) was issued a post-dated cheque drawn on Indian Overseas Bank (IOB) in February 2012 and it was required to be banked in March 2013. However, after receiving instructions on 31 October 2012 from the group's lead lender State Bank of India (SBI), its bank account with IOB was closed. “Once the IOB account was closed, replacement cheques from SBI were issued to complainant also. However the IOB cheques were not returned back to the company by the complainant and the same were misused to justify a false case. The company is legally dealing with the matter and is taking all necessary measures required,” Mr Jain was quoted as saying in the report.
According to a report in Business Standard, banks were likely to recall their loans from Birla Surya, a Yash Birla group company, which has defaulted on debt payment of about Rs1,000 crore. In April 2013, one of the lenders, United Bank of India had issued a public notice to the company for recovery of Rs70 crore. Birla Surya raised Rs1,000 crore from 11 lenders as capital in the first phase for setting up an integrated unit for fabrication of multi-crystalline silicon wafers and manufacturing of solar photovoltaic (SPV) cells in Maharashtra. The project was facing delays as the financial closure was not complete, with a major portion of the equity not tied-up. The project was also yet to receive the Pollution Control Board certificate, the report says.
In short, while the media is mourning over loss of his private property, there are hundreds of investors who are doing the same for investing in Yash Birla group of companies, either through stock market or as fixed deposits.
Moneylife sent an email to the Yash Birla group companies for their responses. Till the time of writing this story, we have not received any answers from them. We will incorporate their answers as and when we receive it.