Indicating an imminent rate cut, RBI Governor Raghuram Rajan has said inflation has come down to the comfort zone quicker than expected and he is keeping a watch on data to see how much room is there for further easing of the monetary policy. "We are on a phase of accommodation. We are still in that phase. We are looking at the data to see what more room we have," Rajan said. Stating that RBI monetary policy has been accommodative, Rajan said he has cut interest rates three times already this year and he was "still on an accommodative setting". "You know, like other central banks, we are in a wait-and-watch mode. And as the incoming data are analysed, we are looking to see how much monetary room there is for more accommodation," Rajan told Wall Street Journal in an interview on the sidelines of the Jackson Hole summit in Wyoming. Rajan, who was participating in this elite economic symposium of the Kansas City Federal Reserve, said inflation has come down in India, and replied in affirmative when asked whether it was coming into RBI's comfort zone more quickly than he had expected. In an earlier interview also, to CNBC at the same summit, Rajan had said that he was not finished with rate cuts and RBI continues to remain in accommodative mode. When asked whether the capital flight, and currency depreciation would put him in a position to keep the rates unchanged, Rajan told WSJ: "No, you know, capital is attracted to strong economies. What we have seen in India is that for the most part we have been attracting capital. "Now, emerging markets have suffered a loss of capital, outflows, in the last few months. We have had some, nothing too particularly dramatic. It's been a little out from the equity markets. The debt flows have stayed pretty much in." On what would drive his decision between growth and inflation, Rajan said, "I think the growth feeds in, to the extent that it affects our inflation outlook. And if we feel, for example, that global growth is very weak and commodity prices are going to remain low for a long time that feeds into our inflation outlook also. "Our primary focus is on the inflation outlook. That's helped by a good monsoon. It's helped by lower commodity prices. And, you know, it's hurt by a significant exchange-rate depreciation." To a specific question on whether he was biased towards easing of rates but was yet to take a call, Rajan said, "We are on a phase of accommodation. We are still in that phase. We are looking at the data to see what more room we have.(PTI)
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Arvind MathurThere is a lot of innovation in the internet space today and there are too many players as well. What’s more, the ecosystem has also significantly improved for startups in the country, says Arvind Mathur, President, Indian Private Equity and Venture Capital Association (IVCA) . While the sector is today garnering a lot of investor interest, success stories will emerge only from those who are able to beat competition, says Mathur talking to BW|Businessworld’s Paramita Chatterjee What is your overview of the private equity sector in India? Do you think the industry is now at an inflection point?The private equity and venture capital market has definitely evolved over the last couple of years and has thrown open several opportunities across various sectors and different investment ticket sizes. Take startups for instance. Today, the amount of investments that you see going into this space is something new and there are various reasons for that. One, definitely the ecosystem has improved for startups in the country. Two, the talent pool from premier engineering institutes are extremely capable of taking on new ventures especially in the technology field – in fact, that is one sector where businesses are most scalable. And within technology, if you see internet, it is still grossly under-penetrated. So definitely, there is immense scope going forward. The investor fraternity knows the opportunities that lie ahead and are therefore, constantly scouting for good businesses that can change the contours of technology tomorrow. Talking about internet, China has seen some major success stories like Alibaba that grew from $5 million in 1999 to $225 billion in 2014. Do you think ecommerce firms in India have the capability to replicate such success models? Why not? There is a lot of innovation in the internet space and of course, there are too many players as well. While there is a lot of talent in this sector, going forward there will be a few success stories that will emerge. Needless to mention, the sector may undergo massive consolidation and the ones who will survive are the ones who will beat competition. And risk capital investors are aware of this model. They are looking for that one big company which will give them the return that will overshadow all their other investments. In fact, there lies the beauty and challenge for venture capital investors too. What is your take on the government’s initiative to facilitate private equity and venture capital investments? Are they doing enough?Well, the fundamental growth impulses are currently very attractive and these include demographics, high calibre engineers, talent/managerial pool, outsourcing industry and strong foreign exchange reserves, to mention a few. These factors are crucial in playing a role in attracting private equity and venture capital investors. Besides, the government also took certain progressive measures for the private equity industry, the announcements for which were made during the Annual Budget. These include steps like ‘safe harbour’ for India focussed offshore fund managers or funds of funds as they are called to set shop in India and tax pass through status for alternate investment funds. While the government has already pushed the envelope, further fine-tuning of this reform is still required that will make India an ideal investment destination. What is your take on the current exits and fundraising in the industry?Well, I would say that exits and fundraising go hand in hand. Fund raising is not tough for those investors who have proven track record of exits. But yes. Overall fundraising in the sector may still be a challenge even as investments are taking place in full swing. Also, exits depend on a lot of factors, one of them being on capital markets. So, in a lot of ways, it is not in our hands. However, what we as investors and businesses can focus on is developing a strong business models and not think of exits alone. After all, if a business is great, exits automatically will take place.
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In the last seven and a half months (Jan-August) in the current calendar year, as many as 13 investments have been sealed in the sector, reports Paramita Chatterjee Indian restaurant chain Barbeque Nation recently raised over Rs 100 crore from private equity firm CX Partners. Founded in 2006 by Sayaji Hotels, the restaurant offers buffet meals with a concept of in-table grilling. This, in fact, is the second round of funding from CX Partners in Barbeque Nation. It first invested in the restaurant chain in April 2013. The investment comes close on the heels of global financial services giant Goldman Sachs’ investment in Delhi-based Azure Hospitality that owns pan-Asian restaurant brand Mamagoto, two quick service restaurant chains Rollmaal that sells Indian street food and Speedy Chow which serves Thai and Chinese comfort food. Azure also runs catering brand Mamapaati, which currently operates in two markets -- Delhi NCR and Mumbai. As more Indians with higher disposable income take to dining out, the hitherto-fragmented restaurant market is set to become an attractive investment area for risk capital investors, say analysts. “With the culture of dining out picking up in India with changing lifestyle and increased disposable income, this is one space which is definitely garnering a lot of investor attention,” says Raja Lahiri, partner at advisory services firm Grant Thornton. According to consultancy firm Technopak Advisors, the Indian food-service industry is estimated to grow to $78 billion by 2018 from its current level of $48 billion, registering a compounded annual growth rate of 11 per cent. The money raised by restaurant chains is increasingly being used to expand operations across the country and sometimes even in the domestic market. Rahul Khanna, Co-founder and Director at Azure, said: “The India consumption story is strong and going forward, we definitely want to cash in on it.” What’s more, “India’s young, billion-plus population is undergoing a revolution in terms of experimentation with diverse cuisines, driven by online and mobile food ordering services,” he added. The latest data available from research firm Venture Intelligence probably explains the rush of investor money into restaurant chains. In the last seven and a half months (Jan-August) in the current calendar year, as many as 13 investments have been sealed in the sector, more than double of what was in the corresponding period last year. In the Jan-August period in 2014, there were a mere 5 deals worth $45 million. In terms of deal size, the total amount that private equity and venture capital funds have invested so far in 2015 amounts up to $123 million, as per research firm Venture Intelligence. Risk capital investors are increasingly queuing up to invest in restaurant chains, signalling a strong vote of confidence in the India consumption story. Other prominent investment deals in the last few months in the sector include Samara Capital’s $32 million investment in Pizza Hut Franchise and India Value Fund’s $30 million capital infusion in Indigo Delicatessen. Further, the sector has also witnessed a few smaller deals. For instance in the month of July, Faasos Food Services, a technology-focused quick-service restaurant chain, raised as much as $16 million from Sequoia Capital and Lightbox. Similarly, Massive Restaurants, a two-year-old company established by Zorawar, son of celebrity chef Jiggs Kalra, too sold half of its stake to Everstone Capital. The list is just endless. Besides, the overall investor interest in the food and restaurant sector has also increased significantly after the listing of Speciality Restaurants, which owns brands like Oh! Calcutta and Mainland China and the IPO of fruit drink manufacturing company, Manpasand Beverages. Earlier, Jubilant Foodworks that runs the fastfood retail chain under the Dominos pizza brand in the country hit the capital market giving an exit to its then investor JP Morgan.
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The extended repayment period and enhanced loan eligibility which comes at a cost, may not suit all home loan seekers but be suitable in extraordinary situations only, writes Sunil Dhawan ICICI Bank has launched a new home loan product called ‘Extraa Home Loans’ that will allow borrowers to enhance their loan eligibility amount up to 20 per cent and also provide an option to extend the repayment period up to 67 years of age. Such home loans, however are for home value up to Rs 75 lakh thus catering to the affordable housing section of the real estate industry. The facility is currently offered in Greater Mumbai, National Capital Region, Bengaluru and Surat. The Loan matrix: Typically, home loans have a loan-to-value (LTV) of 80 per cent as set by RBI. So, on a property that costs Rs 75 lakh, the maximum loan could be for Rs 60 lakh. The actual sanctioned amount would however depend on borrower’s eligibility. The balance 20 percent i.e. Rs 15 lakh would be the down payment to be arranged by borrower. While sanctioning the loan amount, banks also take into account other loan liabilities that the borrower services through EMI. Also, income of the borrower determines the repaying capacity and thus the loan amount. This is typically around 40-45 per cent of the take-home income of the borrower. Also, even though there is no regulatory guideline, banks prefer keeping the loan tenure equal to the retirement age of the borrower which typically is 60. At times, eligibility of home loan gets restricted because of the income and age because of which the tenure and the loan amount gets restricted. What’s extra: This product addresses these two points – one, it allows to enhance the eligibility of home loan amount and secondly increases the age for repayment. What is important is that the LTV still needs to be maintained. These are the three variants of ‘Extraa’. a) For middle aged, salaried customers: This variant is suitable for salaried borrowers up to 48 years of age. While in a regular home loan, the borrowers will get a repayment schedule till their age of retirement, with this facility they can extend their loan tenure till 65 years of age. b) For young, salaried customers: The salaried borrowers up to 37 years of age are eligible to avail a 30 year home loan with repayment tenure till 67 years of age. c) Self-employed customers: There are many self-employed customers who earn higher income in some months of the year, given the seasonality of the business they are in. This variant will take the borrower's higher seasonal income into account while sanctioning those loans. What’s the cost: This enhancement of loan limit and the extension of age comes at a cost. The bank will charge a fee of 1-2 per cent of total loan amount as the loan guarantee is provided by India Mortgage Guarantee Corporation (IMGC). The risk of enhanced limit and of increasing the tenure essentially is taken over by IMGC. What to do: Try to arrange the down payment as much as possible. Make sure you have exhausted all sources including friends, relatives for accumulating down payment. Try sticking within your budget while searching for home. This product could appeal to those who are either contemplating a house outside their budget or not able to arrange enough down payment. Also, property process have more or less become stagnant, try bargaining with builders for the home of your choice. An HDFC study few years back had shown that borrowers repay full outstanding at around 7 years. If that is the case, paying a fee to enhance limit and repayment period may not serve its purpose.
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There is a better than even chance that the Reserve Bank of India (RBI) will cut interest rates at its policy meeting on 29 September thanks to inflation striking a record low, according to a Reuters poll, marking a shift in expectations from earlier.The median from survey of 21 economists showed a 60 per cent chance that the central bank would cut its policy repo rate from 7.25 per cent at the next meeting, whereas a previous poll in July had shown a move was more likely in the final three months of the year.Since then, India has released consumer price data for July that showed retail inflation at a record low of 3.78 per cent, giving the RBI more room to ease policy.Keen to inject more momentum in the economy and encourage investment, the government and business community have urged the central bank to lower interest rates, though RBI Governor Raghuram Rajan has stressed that he wants to see low inflation on a sustained basis."We have fuel disinflation making a comeback all over again. Crude prices are back down," said Vishnu Varathan, senior economist at Mizuho Bank.Varathan noted the price of onions, a staple ingredient in Indian cooking, was beginning to rise, putting upward pressure on food inflation.But, he said the RBI would find it harder to cut interest rates later in the year, if the US Federal Reserve delays raising interest rates, which it is expected to do.The RBI left interest rates unchanged at its last policy review on 4 August, having already cut them by 75 basis points this year as a slump in global commodity prices brought inflation under control. By holding rates steady, Rajan went against the majority on an advisory panel, who had recommended a reduction.India is due to release economic growth data for the April-June quarter on Monday.The median forecast given by 27 economists put year-on-year growth at 7.4 per cent for the quarter, slowing from 7.5 per cent in the January-March period.Whereas the headline figure looks healthy, many economists have treated the data series with caution since the statistics department revised its methodology for measuring gross domestic product earlier this year.Other indicators and on-the-ground evidence suggest the economy is struggling, and there is growing impatience with Prime Minister Narendra Modi's government to implement more policies that can galvanise growth.The government is trying to introduce a nationwide goods and services tax to create a more unified market in a country where levies can differ from state to state.Twelve of the 21 economists polled doubted whether the government could roll out the tax before the next fiscal year begins in April.(Reuters)
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The Rs 20,000-crore private security industry in general, and the ATM security sector in particular, is in for a big churn if plans of the Kerala-based Muthoot Pappachan Group to meet their safety needs of the financial sector players pick up.The Muthoot Pappachan Group, with its flagship gold financing arm Muthoot Fincorp, has floated a new company--MPG Security Group-to take its "technologically advanced security services through emergency response teams (ERTs)" nationwide.The Kochi-based diversified group has also roped in Raman Srivastava, the ex-Kerala top police officer and also the former director general of the BSF, as its chief security advisor, the company said."MPG Security Group and its emergency response teams are the first of their kind initiatives in the country's Rs 20,000-crore private security market," Muthoot Pappachan Group chairman and managing director Thomas John Muthoot told PTI."While we see large potential for every company that employs private security and needs technologically advanced security solutions, we see an immediate potential from the banking sector, especially for their ATM security," he said.Muthoot said the company is in discussions with a leading ATM security provider to offer ERT services to the around 2-lakh-odd ATMs deployed across the country.Stating that banks lose heavily in their ATM business, primarily due to the huge cost involved in deploying security personnel, Muthoot described manned security as a sheer waste of resources as technology like the one his company offers can take care of such needs. He also said ERT-based security services are in vogue in the Western markets.He said banks on an average spend around Rs 50,000 a month to protect an ATM alone. This works out to be around Rs 1,000 crore for the sector a month that has around 2 lakh cash vending machines deployed.Last year, largest lender SBI said it had lost over Rs 350 crore in its ATM business, a good portion of which was spent towards manning these machines that count around 60,000, making it the largest operator of ATMs in the country."If banks adopt our technology tool, they can save hundreds of crores in security cost alone," Muthoot said, adding, "Muthoot Fincorp alone had spent Rs 70 crore last year on security cost, which is one-third of its net profit. My objective is to bring it down to around Rs 10 crore a year."Explaining how the ERT works, Muthoot said the company has already set up 16 control rooms at key cities in the country."Once any of these control rooms gets a call/alert from the electronic sensor fitted at every ATM, our security team in the immediate vicinity gets alerted and they can reach the trouble spot in 20-30 minutes," he said."Each of the control room can handle around 30-25 Muthoot Fincorp branches spread across a 20-km radium," Muthoot said, adding "if we get more customers, then this 20-30 minutes response time can be halved 10-15 minutes," Muthoot said.He further said currently the facility is being offered to his Muthoot Fincorp branches in Kerala and Tamil Nadu. Soon, it will be extended to Karnataka and Andhra. The company has tied up rival Muthoot Finance to offer the service to its branches in Kerala and Tamil Nadu from next month, which will be gradually ramped up to other states, the chairman said.The company has already set up 77 ERTs involving 300 specially trained security personnel. These security personnel are trained in paramilitary skills and are supplied with guns.Muthoot said each ERT consists of a specialised team of three-able bodied persons in uniform, equipped with non-lethal weapons, GPRS, wireless communicators and fully-equipped vehicle with alarm systems and who can handle any security related exigencies from 9.30 PM to 5.30 AM.The Muthoot Pappachan Group have interest in financial services, automotive, property, hospitality, and alternate energy. It employs over 20,000, serving over a million customers.The group's main companies include the gold financing arm Muthoot Fincorp, Muthoot Housing Finance, Muthoot Capital Services, which is the only publicly traded entity from the group and offers vehicle loans, and Muthoot Microfin.The group's hospitality arm has star hotels run by the Taj and Hilton groups, Villa Maya the exclusive restaurant and SkyChef the air catering unit.(PTI)
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Reserve Bank of India governor, Raghuram Rajan on Thursday (27 August) identified three areas as a “work in progress” – the economy, the fight against inflation and the ability of banks to cut interest rates. The central bank believes India's growth outlook is improving gradually and says the real activity indicators are backing its 7.6 percent gross domestic product (GDP) projection. In June, Mint Road had lowered the growth forecast for the current fiscal to 7.6 percent from 7.8 percent projected in April, citing various risks, including poor monsoon and rising crude oil prices. In the `Governor’s Overview: Annual Report (2014-15) – a first of its kind section -- Rajan noted: “First economic growth is still below levels that the country is capable of. Second, inflation projections for January 2016 (as of early August 2015) are still at the upper limits of RBI’s inflation objective. Third, the willingness of banks to cut base rates -- whereby they forego income on existing borrowers in order to attract more new business -- is muted; not only does weak corporate investment reduce the volume of new profitable loans, some bank capital positions, weakened by NPAs (non-performing assets) , may prevent them from lending freely”. The RBI Annual Report observed that the outlook for growth is improving gradually; business confidence remains robust, and as the initiatives announced in the Union Budget to boost investment in infrastructure roll out, they should crowd in private investment and revive consumer sentiment, especially as inflation ebbs. While the progress of the monsoon has allayed initial fears of moisture shortfall, uncertainty surrounding the progress and distribution of the monsoon remains a risk to the outlook for both growth and inflation. In the first four months of 2015-16, indicators of real activity have broadly tracked the RBI baseline projection of output growth (at basic prices) at 7.6 per cent for the year as a whole, up from 7.2 per cent in 2014-15. Taking into account initial conditions, including the prospects for the monsoon and for international crude prices, the RBI projected in April 2015 a baseline path for inflation in 2015-16 in which it would be pulled down from current levels by base effects till August but is expected to start rising thereafter to below 6.0 per cent by January 2016. “So far, inflation outcomes have closely tracked these projections. The risks to this trajectory are balanced as the weather-related uncertainties are offset by falling crude prices. Inflation developments will warrant close and continuous monitoring as part of the overall disinflation strategy that requires inflation to be brought down to 5 per cent by January 2017”, it said. On banking reforms, the Annual Report was clear that it will press ahead, however, tough it may be. “A regulatory view, fashionable in the past, was that the pace of regulatory reforms had to be limited by the capacity of our banks, especially our public sector banks. The current stress in the banking system suggests that the real economy will not wait for the banking system, and a slow pace of reform could lead to greater, rather than lower risk residing in the banking system. Financial sector reforms need to move on many fronts. It was pointed out that for a country as big and populous as India, reforms cannot be shots in the dark, subjecting the economy to great uncertainty and risk. “Wherever possible, we have to move steadily but firmly, ever expanding the scope of reforms while always limiting the uncertainty they create. The Chinese term this ‘Crossing the river by feeling the stones’. It is an appropriate metaphor to guide our own reforms”.
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The investment was made through a mix of primary infusion and a purchase of secondary stake from Banyan Tree Growth Capital, writes Paramita Chatterjee Carlyle, one of the world's largest private equity groups, acquired a significant minority stake in Faridabad-based DEE Piping Systems from its existing investor Banyan Tree Growth Capital. The deal size could not be ascertained. The investment has been made through a mix of primary infusion into the company and a purchase of secondary stake from Banyan Tree Growth Capital, as per a statement released by the company. Banyan Tree Growth Capital along with Capvent invested Rs 50 crore in DEE Piping Systems in 2011. Founded in 1983, DEE Piping Systems is a significant player in the global pre-fabricated piping industry. It provides design, detailed engineering and fabrication of high-quality pressure piping systems to clients across diversified industries such as power, process and oil & gas. "We expect to leverage Carlyle’s international brand equity, global resources and strong sectoral expertise to further grow and diversify our business domestically as well as globally,” said K.L. Bansal, chairman and managing director, DEE Piping. Boutique advisory firm o3 Capital acted as the sole advisor to DEE Piping Systems. “DEE Piping has built an extremely successful business with strong capabilities across multiple dimensions - deep relationships with its marquee customers, state-of-the-art infrastructure, comprehensive product and service offering, a pool of skilled workforce, and a consistent track record of timely delivery of quality products,” said Shankar Narayanan, managing director and co-head, Carlyle Asia Growth Partners. Globally, Carlyle has over $193 billion of assets under management. It forayed in India in 2000 and since then, it has invested over $1.3 billion of equity in more than 30 transactions across various verticals such as consumer & retail, financial services, healthcare, industrial, real estate, and technology & business services.
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