SBI breaches RBI norms on RIL exposure for 3rd straight year

Detailing the cases where it breached prudential limits for single-borrower exposure during the fiscal ended 31 March 2011, SBI has named RIL as also public sector majors IOC and BHEL as three such borrowers in its annual report

New Delhi: State Bank of India (SBI), the country's largest bank, has breached the Reserve Bank of India's (RBI) credit exposure norms during three consecutive years with regard to its loans provided to Mukesh Ambani-led Reliance Industries (RIL), reports PTI.

The public sector lender, which also has significant exposures to troubled Air India besides certain telecom firms being probed in relation to the second generation (2G) spectrum allocation scam, has now disclosed that its credit to RIL was in excess of the limits prescribed under the RBI's prudential credit norms.

Detailing the cases where it breached prudential limits for single-borrower exposure during the fiscal ended 31 March 2011, SBI has named RIL as also public sector majors Indian Oil Corporation (IOC) and BHEL as three such borrowers in its annual report.

This is the third straight year when SBI has exceeded the single-borrower ceiling with regard to RIL, as per the bank's annual reports for the past three financial years.

However, the bank brought down its exposure to RIL within the limit on the last date of the previous fiscal, i.e. 31 March 2011, according to the SBI annual report.

The public sector lender had provided credit in excess of prudential norms to RIL during 2009-10 and 2008-09 also.

During the year 2009-10, the bank's credit exposure was in excess of prudential limits for RIL, IOC, BHEL and the Tata Group.

Prior to that, SBI exceeded prudential credit limits during 2008-09 with regard to its exposure to RIL and IOC.

As per RBI guidelines, the exposure ceiling limits are 15% of capital funds in case of a single borrower and 40% of capital funds in the case of a borrower group.

However, the credit exposure to a single borrower can go up to 20%, if the additional 5% exposure is on account of extension of credit to infrastructure projects.

Similarly, the credit exposure to borrowers belonging to a group may go up to 50%, if the additional 10% exposure is for credit to infrastructure projects.

The bank's exposure to telecom companies recently came under criticism as some of these companies are facing probes in connection with the 2G scam involving alleged breach of regulations in allotment of licenses.

In an analyst conference after the bank's full-year results for 2010-11, SBI disclosed that its exposure to telecom companies was Rs22,600 crore (3% of its loan book), while exposure to telecom companies under investigation was Rs1500 crore.

Besides, its exposure to airline companies, including troubled Air India was Rs4,500 crore.

The bank also disclosed a total exposure of Rs1,00,000 crore in the infrastructure sector, including Rs30,000 crore to the power sector.

With regard to single-borrower exposure limit exceeded in 2010-11, SBI said in its annual report, that its credit to RIL breached the prudential ceiling on three occasions during the year-between April and July 2010, from August to October 2010 and from November 2010 to February 2011.

Between April and July 2010, SBI's exposure to RIL was Rs15,815.48 crore, as against a ceiling of Rs13,646.26 crore, while the exposures exceeded the respective limits by well over Rs1,000 crore on two other occasions also.

The outstanding exposure to RIL as on 31 March 2011 stood at Rs5,645.44 crore, which was within the limits.

For IOC and BHEL also, the credit exposure exceeded the ceiling on three occasions during 2010-11.

During the year 2009-10, the credit exposure exceeded the prudential ceilings on three occasions each for IOC, RIL and BHEL, while the exposure was in excess of the limit for the Tata Group on two occasions.

For 2008-09 also, the credit exposure was in excess of the permitted level on three occasions for both RIL and IOC.


ADF Foods: In India we will see growth because it is a totally new market for us

The leading ethnic Indian food company is banking on the changing trend in the country for quick growth, besides keeping an eye open for more acquisitions to expand its business

ADF Foods, the leading ethnic Indian food company, says it's looking for more global acquisitions to expand. The company, which specialises in pickles, chutneys, canned and frozen foods, says that a growing middle class and an increasing acceptance of packaged food in India and abroad is helping the company grow. ADF Foods has a global presence and a large part of its revenues comes from exports. The company has made a re-entry in the Indian market and is hopeful of earning about 40% of its revenues from the domestic market in five years. In an interview with Moneylife, Bimal Thakkar, managing director, ADF Foods Ltd, discussed the company's performance and its plans. Edited excerpts:

Moneylife (ML): What, according to you, are the key trends in the ethnic food market in India and globally? And what is the outlook for the packaged food industry in India?
Bimal Thakkar (BT): Both these markets are totally different, even though they have similar consumers. In India, there is availability of freshly cooked food and domestic help, so the requirements of Indians compared to that of the people abroad are totally different. There they don't have domestic help or time to cook, so they easily accept packaged food. This is also happening in India. Here, organised retail is growing. There are more nuclear families. They have more exposure to the West and all these factors are key factors for the acceptance of canned or packaged food. Overall, the mental block that "packaged food is not good for you" is going off and the packaged food industry is catching up in India.

ML: Your product "ADF Soul" a distinctive pickle made in virgin olive oil, was launched in Pune and Mumbai. According to reports, you are planning to launch it pan-India. How has this product been accepted?

BT:  We were a little apprehensive about launching this product in India, as we were not sure if the Indian consumer is ready to pay the premium for it. But we found that the consumer doesn't mind spending extra on a healthy product, as olive oil is good for health. Also, the premiums we are charging are not very high. In fact, we are selling more products of ADF Soul than traditional Indian pickles.

ML: There is a lot of competition in the domestic pickle market. And now you have made an entry in this market. How do you position yourself, given the competition and changing Indian mindset?
BT: Our products are always value for money. Certain niche products, like the olive product, will be sold at premium prices. For the rest we are at par with competitors in terms of pricing, quality.

ML: There has been a dip in mango production this year. Has that affected the production especially of chutneys and pickles?
BT: Luckily, we have been able to source our requirement, both for exports as well as for the domestic market. But our costs have gone up. We will try to balance out and not burden the consumers with price increases. But some amount will be increased in the near future.

ML: ADF Foods recently acquired US-based Elena's Food Specialities, Inc. How has that helped the company in terms of business and positioning in the global market?

BT: The rationale for the Elena acquisition was three-fold. One, it helped us to diversify our range of products into the complimentary range. So here we got into the Mexican food range. Second, we moved up the value chain where we got closer to the customer and to the distribution and sales chain, through which we will now put our Indian products. Third, we have our manufacturing facilities in the US, which is approved by the US Department of Agriculture. This will give us the ability to make meat products in the US.

ML: Since you have made a re-entry in the Indian market, what kind of domestic markets are you planning to tap?
BT: At the moment, our product range is mainly for the urban market, which will also be for the metros and mini-metros having one million-plus population.

ML: And the rural market?
Yes, once we tap these markets, we will put our products in the rural markets as well.

ML: More than 90% revenues are from exports and businesses from global markets. Will this sustain?
BT: Yes, that will continue to grow. But India, in five years, should contribute around 40% of our revenues.

ML: The net profit of the company went up by 104% in the fourth quarter. Despite rising input costs, the company managed to maintain the margins. What will be the strategy going forward? Are you planning any new product launch, or expansion?

BT: The integration of Elena has helped us to grow. In India, we will see growth because it is a totally new market for us. And we are actively looking out for acquisition of foreign companies. We still have a lot of cash on our books.


IGC lowers 2011-12 global wheat output estimate to 667 million tonne

India, the world's second-biggest producer of wheat, is expected to harvest a record 84.27 million tonne of wheat this year. China, with more than 100 million tonne of output, is the largest wheat producing country in the world

New Delhi: The International Grains Council (IGC) has lowered its global wheat production forecast for 2011-12 to 667 million tonne as crop prospects in countries like the US are not bright due to unfavourable weather, reports PTI.

Earlier, in April, the London-based organisation had pegged global wheat output at 672 million tonne this year. The wheat production forecast for the current year is still higher than the 649 million tonne output last year.

"The outlook for 2011-12 wheat crop has been affected by unfavourable weather in a number of countries, especially in the EU and US, and the forecast of global production is therefore reduced by 5 million tonne to 667 million tonne," the IGC said in its latest Grains Report.

Global wheat demand is expected to touch a new record of 669 million tonne this year, it said.

"Use (of wheat) for ethanol is growing less quickly than expected, including in the EU, while greater use of alternative feeds, including barley, is expected to cut the feeding of wheat in Russia," the report said.

Global wheat trade is still forecast to expand by five million tonne, mainly in North Africa, Near East Asia and the EU, it noted.

India, the world's second-biggest producer of wheat, is expected to harvest a record 84.27 million tonne of wheat this year, according to government data. China, with more than 100 million tonne of output, is the largest wheat producing country in the world.

With respect to global maize production, the global body said that increased planting and higher yields are expected to result in a record output of 848 million tonne in 2011-12, as against 812 million tonne last year.

Larger crops in some countries, including the EU and Indonesia, are expected to limit global maize trade to 92.5 million tonne, down by 1.5% from the previous year, it said.


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