A few months ago Reliance and Birla Mutual Funds were pushing hard a combo plan of mutual fund and insurance. One investor is now caught in a bind having fallen for Reliance’s pitch. Don’t expect SEBI to do anything about it though
If you were a mutual fund investor, investing in Reliance Tax Saver Fund (which also provides life cover) via the SIP (systematic investment plan) route, and wanted to change the bank from which you’re paying SIP, you probably would not be able to do it! Such is the case for Deepak from Karnataka, who has been investing Rs1,000 per month from his Punjab National Bank account in the Reliance MF scheme that came with a coverage of Rs10 lakh. However, when he wanted to switch banks, as he had moved to a new company, he could not do so. Reliance MF had told him that such a move was not possible and that the insurance cover would be reduced or completely nullified if he changed his bank account!
“How can Reliance MF not have the facility for investors to seamlessly change bank accounts?” moans Deepak. Apparently, Reliance MF had stated this anti-investor clause in the offer document itself. The facility for switching banks is only available with ECS debit, and not auto-debit as in Deepak’s case. If Deepak wishes to accede to Reliance MF’s demand of reduced coverage, he would get a reduced coverage of Rs5.4 lakh instead of Rs10 lakh, merely because he had switched bank accounts. The other option, of course, would be to continue to invest in the SIP insurance plan from his existing bank account, and keep transferring money from his new bank account for the remainder of the scheme which is 12 years (!)—a major hassle. Deepak adds “to impose a harsh penalty just for switching banks is beyond our imagination and goes against basic business principles.” He had complained to Reliance MF’s Karnataka state head as well as compliance head, and has not got any help so far.
In a supreme irony, Reliance Mutual Fund CEO Sandeep Sikka was quoted in the media in August as saying “There cannot be any short-cut to reach out to the under-penetrated market but to create financial literacy and spread knowledge about what a mutual fund is,” added Mr Sikka. If this is the case, why hadn’t Reliance MF informed Deepak before-hand of this auto-debit clause since he had opted for it? Indeed the Reliance MF website lists auto-debit as an important convenience.
According to Sunil Nair, R&T operations of Reliance MF, “We need a cancellation request to cancel the mandate registered in one bank and registration mandate to register the mandate in another bank.” Unfriendly banking regulatory laws are forcing customers to jump from one place to another in order to get a seemingly simple thing done. Why should a customer like Deepak work hard to get these things done? He has to get two letters now—a cancellation mandate from PNB and a registration mandate from the new bank he had signed up—and then produce both these to Reliance MF. Why can’t the institutions step up and make it easier for customers to do business with them and, in this case, make bank switching easier? Obviously, if this facility is available— it is a win-win for both institution and consumers.
The recent tightening of fund regulations and strict banking laws has forced mutual funds to look to alternative sources of income. Some of the regulations have squeezed the cost structure of the fund industry as a whole, and thus have been forced to mis-sell products to consumers in search for better margins. Deepak’s case is one such case where the fund changed the rules to suit itself while at the same time passes the onus to the customer to solve the problem.
This is yet another case where institutions, and the broad regulatory environment, short-change the small investor for their own benefit. What is appalling in this case is that it lacks empathy and common sense. How difficult is it to switch bank accounts? If it is due to regulatory requirement that an institution cannot entertain this simple facility to customers, it only shows how ignorant our regulators are, and it badly reflects on the way consumers are treated in this country. Not only this, but Reliance MF failed to inform Deepak of the auto-debit clause when he had opted for it. It also shows that regulator’s apathy towards institutions and consumers alike will only make it more difficult to for products to reach a wider section of the population. Moreover, as more and more cases like this crop up, consumers will be more aware and stay away from them.
Investors, after reading this episode, will be less inclined to invest with such institutions and products that are not customer friendly. No wonder investor population in India is not rising but shrinking!
A short term rally has started which may see the Nifty reach 4,900
Across-the-board buying by institutional investors helped the market log gains for the second day in a row. The two days of gains have nearly wiped off most of the losses incurred in the prior four days (between 27 December 2011 and 30 December 2011). Today’s gain happened on an increasing volume of 52.10 crore shares on the National Stock Exchange (NSE). We may see this rally to be a small one pushing the Nifty up to the level of 4,900. Today, after a positive opening the index easily crossed its 20-day moving average of 4,740, which indicates that the rally may continue for few more days.
The market extended Monday’s gains by opening higher today on optimism in the Asian markets in morning trade today. Better-than-expected manufacturing data from China and India supported gains across the region, however, European concerns kept investors guarded. The Nifty opened 39 points up at 4,676 and the Sensex added 123 points to start the day at 15,641. The opening figures of the two benchmarks were their intraday lows.
Brisk across-the-board buying led all sectoral indices higher. Metal, banking, capital goods and realty led the rally. The green opening of the key European markets pushed the market to a higher trajectory in noon trade. The indices continued their northward journey with the market hitting its intraday towards the end of trade. At the highs, the Nifty climbed to 4,754 and the Sensex scaled 15,907. The market settled marginally off the highs and in the green for the second straight day. At the close, the Nifty gained 129 points at 4,765 and the Sensex jumped 421 points to finish trade at 15,939.
The advance-decline ratio on the NSE was a splendid 1446:334.
In line with the handsome gains on the Sensex, the broader indices also joined the rally. The BSE Mid-cap index surged 2.42% and the BSE Small-cap index climbed 2.33%.
All sectoral indices closed higher, led by BSE Metal (up 5.05%); BSE Capital Goods (up 4.40%); BSE Bankex (up 4.35%); BSE Realty (up 4.28%) and BSE PSU (up 3.78%).
DLF (up 6.84%); Tata Steel (up 6.06%); Jindal Steel (up 5.67%); Tata Motors (up 5.50%) and Tata Power (up 5.16%) were the top performers on the Sensex. Mahindra & Mahindra (down 1.09%) and Hero MotoCorp (down 0.06%) were the only losers on the index.
The main gainers on the Nifty were DLF (up 6.58%); Kotak Bank (up 6.24%); Axis Bank (up 5.81%); Tata Steel (up 5.73%) and BHEL (up 5.58%). On the other hand, BPCL (down 1.77%); M&M (down 1.56%); Ambuja Cement (down 1.02%) and Hero MotoCorp (down 0.75%) settled at the bottom of the index.
Markets in Asia settled higher on better-than-expected manufacturing data from China and India. Meanwhile, South Korea announced an increase in Budget spending in the current quarter to help its economy cope up with the global slowdown. Singapore’s GDP fell 4.9% in the December quarter following a 21.7% decline in manufacturing activity, government data showed. Despite the negative data, Singapore’s benchmark Straits Times index settled higher.
The Hang Seng jumped 2.40%; the Jakarta Composite climbed 1.28%; the Straits Times gained 1.59%; the Seoul Composite surged 2.69% and the Taiwan Weighted advanced 1.46%. Markets in China, Malaysia and Japan were closed for trade today. At the time of writing, the key European indices were mixed and the US stock futures were in the red.
Back home, foreign institutional investors were net sellers of stocks amounting to Rs93.87 crore on Monday. On the other hand, domestic institutional investors bought shares worth Rs84.34 crore.
Bajaj Auto today unveiled a mini four-wheeler for intra-city urban transportation targeting three-wheeler customers. The company, which had in 2008 showcased a concept small car but decided not to go ahead with the project, will launch the new product named RE60 later this year. The stock gained 1.14% to close at Rs1,492.25 on the NSE.
Bhushan Steel has deferred its planned Rs20,000 crore steel project in West Bengal due to the state government’s decision not to acquire land for industry as well as uncertainty over Sumitomo Industries’ participation in the project. The stock jumped 5.62% to settle at Rs328.75 on the NSE.
Orchid Chemicals & Pharmaceuticals has successfully completed Phase-I trial of its orally-administered phosphodiesterase 4 inhibitor (PDE4) molecule OCID 2987 positioned for the treatment of inflammatory disorders including chronic obstructive pulmonary disease (COPD). The trial was conducted in Europe. The stock climbed 3.72% to close at Rs139.45.
After today’s announcement Mukesh Ambani now controls Eenadu TV and the Network18 Group with an indirect finger in NDTV. That is about 30 channels across entertainment and news segments in English and regional languages
In his second move to enter into media and entertainment, Mukesh Ambani, the richest person in India, finally made his intentions clear. In a deal that may appear complicated to a lay person, Independent Media Trust, a trust set up by Mukesh Ambani's flagship Reliance Industries (RIL) has agreed to fund promoters of both Network18 Media and Investments (Network18) and TV18 Broadcast (TV18) to subscribe to the proposed rights issue of these companies. Last month, Moneylife had reported about Mr Ambani's interest in the debt-ridden Network 18 Group.
According to a media release issued by RIL, Raghav Bahl, the promoter of Network18 and TV18, and his team would continue to have full operational and management control of both the companies. Network18 Media and Investments, the holding company for the conglomerate, has annual revenue of about Rs1,500 crore but makes losses. The Network18 Group is up to its neck in debt and was apparently talking with Thomson Reuters to sell a 26% stake in Newswire18, a real-time financial news agency.
"The Promoter Companies of Network18 and TV18 and the Trust have entered into a Term Sheet under which the Trust would be subscribing to the Optionally Convertible Debentures (OCDs) to be issued by the Promoter Companies. Reliance will leverage its deep understanding of the Indian markets—consumer insights, technological expertise, and the ability to build & manage scale—to make this a "win-win" partnership. This will create value and be accretive to the shareholders of RIL," the Mukesh Ambani group company said in a press release.
This is the first part of the deal. In the second part, Infotel Broadband Services (Infotel), a unit of RIL, has signed a memorandum of understanding with both, TV18 and Network18 for preferential access to distribute all contents of the media group companies through its fourth-generation (4G) broadband network. As per the agreement, RIL would divest part of its interest in Eenadu TV (ETV) channels to TV18.
Both Network18 and TV18 are raising funds worth Rs2,700 crore each through rights issues. Network18, the promoter and majority shareholder in TV18 would subscribe to around Rs1,400 crore out of the total Rs5,400 crore rights issue. "The contribution of the current promoter entities of Network18 in this net aggregate rights issue of both Network18 and TV18 will be about Rs1,700 crore, the companies said in a release to the stock exchanges.
ETV owned by Ramoji Rao has a bouquet of vernacular channels and some of the language channels enjoy top position in that region. Earlier, RIL had admitted that the company and its group companies invested Rs2,600 crore in Ushodaya Enterprises, the holding company of ETV channels.
At present, RIL holds 100% interest in regional news channels such as ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar and ETV Urdu channel, and entertainment channels like ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati and ETV Oriya. RIL also holds 49% interest in ETV Telugu and ETV Telugu News, through its investment.
The Mukesh Ambani group has divested its 100% interest in ETV news channels, 50% in entertainment channels and 24.5% interest in Telugu channels to TV18.
According to media reports, billionaire Mukesh Ambani, India’s richest person has also been holding talks with a host of media and entertainment firms, including Walt Disney’s Indian venture UTV Software, to acquire content for its upcoming telecom venture. US-based Walt Disney holds over 50% stake in UTV Software Communications and it is in process of acquiring the entire stake in the Indian firm. A deal with Walt Disney would give RIL’s telecom venture access to a host of games, entertainment and other children-focussed content solutions.
RIL has a 95% stake in Infotel Broadband Services, marking its entry into the telecom sector. Infotel is the only company to have pan-India BWA (Broadband Wireless Access) licence.
More than two decades ago Reliance had made a bid to enter the media by buying the Observer newspaper which it ran half-heartedly and closed down. Anil Ambani, the estranged and debt-strapped younger brother of Mukesh was leading that effort. The ADAG group controlled by Anil Ambani has large stakes in TV Today and other media companies.
The Network 18 Group comprises a variety of television, print, web and entertainment properties most of which are losing money. Its main properties are collaborations with top media companies such as CNBC, CNN, MTV and Viacom.