All NSE Members,
Sub: Exclusion of futures and options contracts on 4 securities
Members are advised to note that based on the stock selection/exclusion criteria as prescribed by SEBI vide circular SEBI/DNPD/1/2012 dated January 02, 2012 and NSE circular No 045/2011 dated May 3, 2011, contracts for new expiry months in the following securities will not be issued on expiry of existing contract months:
1
AREVAT&D
Areva T&D India Limited
2
DHANBANK
Dhanlaxmi Bank Limited
3
MERCATOR
Mercator Limited
4
NATIONALUM
National Aluminium Company Limited
However, the existing unexpired contracts of expiry months February 2012, March 2012 and April 2012 would continue to be available for trading till their respective expiry and new strikes would also be introduced in the existing contract months.
This circular shall be effective from February 24, 2012.
Sub: Exclusion of futures and options contracts on 4 securities
Members are advised to note that based on the stock selection/exclusion criteria as prescribed by SEBI vide circular SEBI/DNPD/1/2012 dated January 02, 2012 and NSE circular No 045/2011 dated May 3, 2011, contracts for new expiry months in the following securities will not be issued on expiry of existing contract months:
1
AREVAT&D
Areva T&D India Limited
2
DHANBANK
Dhanlaxmi Bank Limited
3
MERCATOR
Mercator Limited
4
NATIONALUM
National Aluminium Company Limited
However, the existing unexpired contracts of expiry months February 2012, March 2012 and April 2012 would continue to be available for trading till their respective expiry and new strikes would also be introduced in the existing contract months.
This circular shall be effective from February 24, 2012.
India's largest lender the State Bank of India (SBI) referred three loan accounts including Bharati Shipyard (BS), ARSS Infrastructure and Vijai Electricals (VE) to the Corporate Debt Restructuring (CDR) cell. The sum total of credit exposure in these companies would be around Rs 3,430 crore by the bank, sources familiar with the development.
The SBI share of loans to BS comes around Rs 1,655 crore out of total exposure at Rs 5,650 crore by a consortium of 15 lenders. The bank lent Rs 773 crore to ARSS out of total loans around Rs 1,600 crore by eight lenders. For VE, it stood at around Rs 1,000 crore as against total Rs 2,200 crore by seven banks.
Credit exposure at a glance:
Figures are written on approximate basis.
At the time of CDR proposal submission in the third quarter (Q3), all three companies remained standard assets. Companies have been repaying the interest rate. In anticipation of defaults (before the principal payment becomes due), they were referred to CDR cell. As per RBI norms, a bank has to make provision of 2% on any restructuring of standard asset.
Under the regulatory frame work of the Reserve Bank of India (RBI), the CDR forum caters to an official platform for both the creditors and borrowers to amicably and collectively evolve policies for working out debt restructuring plans.
The CDR cell will make the initial scrutiny of the proposals received from creditors. It happens in two stages: flush stage and final report stage, all related to the economic viability study of the proposal. A loan account can be referred to the CDR cell when at least 75% of the banks (by value) and 60% of creditors (by number) agree to resolve the case under CDR system.
The asset quality concerns cast a shadow on the SBI's Q3 performance. The gross non-performing asset (NPA) ratio stood at 4.61% as against 4.19% in the previous quarter (Q2). The net NPA ratio too rose from 2.04% to 2.22 sequentially.
According to the SBI chairman Pratip Chaudhuri, as much as one fifth of fresh slippages had come from a single company (read Kingfisher Airline).
"So, if you look at the total slippages (net increase) of Rs 6,152 crore, one company alone accounted for around Rs 1,500 crore," the SBI boss said while announcing Q3 results.
However, Chaudhuri did not expect its Air India (AI) exposure turning into an NPA account. The lender has extended a fully secured Rs 1,100 crore loan as cash credit facility to AI.
The SBI share of loans to BS comes around Rs 1,655 crore out of total exposure at Rs 5,650 crore by a consortium of 15 lenders. The bank lent Rs 773 crore to ARSS out of total loans around Rs 1,600 crore by eight lenders. For VE, it stood at around Rs 1,000 crore as against total Rs 2,200 crore by seven banks.
Credit exposure at a glance:
Company
|
SBI exposure
(Rs in crore)
|
Total exposure
(Rs in crore)
|
Bharati Shipyard
|
1,655
|
5650
|
ARSS Infrastructure
|
773
|
1,600
|
Vijai Electricals
|
1,000
|
2,200
|
Figures are written on approximate basis.
At the time of CDR proposal submission in the third quarter (Q3), all three companies remained standard assets. Companies have been repaying the interest rate. In anticipation of defaults (before the principal payment becomes due), they were referred to CDR cell. As per RBI norms, a bank has to make provision of 2% on any restructuring of standard asset.
Under the regulatory frame work of the Reserve Bank of India (RBI), the CDR forum caters to an official platform for both the creditors and borrowers to amicably and collectively evolve policies for working out debt restructuring plans.
The CDR cell will make the initial scrutiny of the proposals received from creditors. It happens in two stages: flush stage and final report stage, all related to the economic viability study of the proposal. A loan account can be referred to the CDR cell when at least 75% of the banks (by value) and 60% of creditors (by number) agree to resolve the case under CDR system.
The asset quality concerns cast a shadow on the SBI's Q3 performance. The gross non-performing asset (NPA) ratio stood at 4.61% as against 4.19% in the previous quarter (Q2). The net NPA ratio too rose from 2.04% to 2.22 sequentially.
According to the SBI chairman Pratip Chaudhuri, as much as one fifth of fresh slippages had come from a single company (read Kingfisher Airline).
"So, if you look at the total slippages (net increase) of Rs 6,152 crore, one company alone accounted for around Rs 1,500 crore," the SBI boss said while announcing Q3 results.
However, Chaudhuri did not expect its Air India (AI) exposure turning into an NPA account. The lender has extended a fully secured Rs 1,100 crore loan as cash credit facility to AI.
An exclusive preview of an economic report on China, prepared by the World Bank & government insiders is alarming:
China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms. "China 2030," a report set to be released Monday by the bank & a Chinese government think tank, addresses some of China's most politically sensitive economic issues, according to a half-dozen individuals involved in preparing and reviewing it.
It is designed to influence the next generation of Chinese leaders who take office starting this year, these people said. And it challenges the way China's economic model has developed during the past decade under President Hu Jintao, when the role of the state in the world's 2nd largest economy has steadily expanded.
The report warns that China's growth is in danger of decelerating rapidly & without much warning. That is what has occurred with other highflying developing countries, such as Brazil and Mexico, once they reached a certain income level, a phenomenon that economists call the "middle-income trap." A sharp slowdown could deepen problems in the Chinese banking & elsewhere, the report warns, and could prompt a crisis, according to those involved with the project. It recommends that state-owned firms be overseen by asset-management firms, say those involved in the report. It also urges China to overhaul local government finances and promote competition and entrepreneurship. The Chinese government must decide "whether it wants state-led capitalism dominated by giant state-owned corporations or free-market entrepreneurship."
Current forecasts by the Conference Board, a U.S. think tank, see the Chinese economy growing 8% in 2012 & slowing to an average annual growth rate of 6.6% from 2013 to 2016. Economists argue that China's annual growth rate will begin to "downshift" by at least 2% points starting around 2015. While some reduction in growth is inevitable—China has been growing at an average of 10% a year for 30 years—the rate of decline matters greatly to the world economy. With Europe & Japan fighting recession and the U.S. experiencing a weak recovery, China has become the most reliable source of growth globally. Commodity producers count on China for growth, as do capital goods makers, farmers and fashion brands in the U.S. and Europe.
How much the report will help reshape the Chinese economy is unclear. Even ahead of its release, it has generated fierce resistance from bureaucrats who manage state enterprises, according to several individuals involved in the discussions. China's political heir apparent, Xi Jinping, now vice president, has given few clues about his economic policies. Analysts expect the high-profile report will encourage Mr. Xi and his allies to discuss making changes to a state-led economic model that has alarmed Chinese private entrepreneurs while creating tension between China and its main trading partners, including the U.S.
Currently, state-managed enterprises tower over the Chinese economy, dominating the nation's energy, natural resources, telecommunications and infrastructure industries. Among other things, they have easy access to low-interest loans from state-owned banks.
China needs to restrict the roles of the state-owned enterprises, break up monopolies, diversify ownership and lower entry barriers to private firms. Currently, many state-owned firms have real-estate subsidiaries, which tend to bid up prices for land, and have helped to create a housing bubble that the Chinese government is trying to deflate. The report also recommends a sharp increase in the dividends that state companies pay to their owner—the government. That would boost government revenue and pay for new social programs, said those involved with the report. Chinese and U.S. economists say that dividend money from profitable state-owned firms now is often directed to unprofitable ones by the State-owned Assets Supervision and Administration Commission, or SASAC, which regulates the firms and tries to ensure their profitability.
China is vulnerable to a sharp slowdown, said Jun Ma, a Deutsche Bank China economist, because it relies too heavily on industries that copy foreign technology and doesn't produce enough breakthroughs of its own. South Korea was able to keep growing rapidly after it hit a per-capita income level of $5,000—about where China is today—because it pushed innovation. However, China lags behind South Korea badly in patents produced per capita, he said.
Chinese local governments often draw much of their revenue from the sale of land, rather than from taxes. The report urges that Chinese social spending be funded more by dividends from state-owned firms and by property, corporate and other taxes.
China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms. "China 2030," a report set to be released Monday by the bank & a Chinese government think tank, addresses some of China's most politically sensitive economic issues, according to a half-dozen individuals involved in preparing and reviewing it.
It is designed to influence the next generation of Chinese leaders who take office starting this year, these people said. And it challenges the way China's economic model has developed during the past decade under President Hu Jintao, when the role of the state in the world's 2nd largest economy has steadily expanded.
The report warns that China's growth is in danger of decelerating rapidly & without much warning. That is what has occurred with other highflying developing countries, such as Brazil and Mexico, once they reached a certain income level, a phenomenon that economists call the "middle-income trap." A sharp slowdown could deepen problems in the Chinese banking & elsewhere, the report warns, and could prompt a crisis, according to those involved with the project. It recommends that state-owned firms be overseen by asset-management firms, say those involved in the report. It also urges China to overhaul local government finances and promote competition and entrepreneurship. The Chinese government must decide "whether it wants state-led capitalism dominated by giant state-owned corporations or free-market entrepreneurship."
Current forecasts by the Conference Board, a U.S. think tank, see the Chinese economy growing 8% in 2012 & slowing to an average annual growth rate of 6.6% from 2013 to 2016. Economists argue that China's annual growth rate will begin to "downshift" by at least 2% points starting around 2015. While some reduction in growth is inevitable—China has been growing at an average of 10% a year for 30 years—the rate of decline matters greatly to the world economy. With Europe & Japan fighting recession and the U.S. experiencing a weak recovery, China has become the most reliable source of growth globally. Commodity producers count on China for growth, as do capital goods makers, farmers and fashion brands in the U.S. and Europe.
How much the report will help reshape the Chinese economy is unclear. Even ahead of its release, it has generated fierce resistance from bureaucrats who manage state enterprises, according to several individuals involved in the discussions. China's political heir apparent, Xi Jinping, now vice president, has given few clues about his economic policies. Analysts expect the high-profile report will encourage Mr. Xi and his allies to discuss making changes to a state-led economic model that has alarmed Chinese private entrepreneurs while creating tension between China and its main trading partners, including the U.S.
Currently, state-managed enterprises tower over the Chinese economy, dominating the nation's energy, natural resources, telecommunications and infrastructure industries. Among other things, they have easy access to low-interest loans from state-owned banks.
China needs to restrict the roles of the state-owned enterprises, break up monopolies, diversify ownership and lower entry barriers to private firms. Currently, many state-owned firms have real-estate subsidiaries, which tend to bid up prices for land, and have helped to create a housing bubble that the Chinese government is trying to deflate. The report also recommends a sharp increase in the dividends that state companies pay to their owner—the government. That would boost government revenue and pay for new social programs, said those involved with the report. Chinese and U.S. economists say that dividend money from profitable state-owned firms now is often directed to unprofitable ones by the State-owned Assets Supervision and Administration Commission, or SASAC, which regulates the firms and tries to ensure their profitability.
China is vulnerable to a sharp slowdown, said Jun Ma, a Deutsche Bank China economist, because it relies too heavily on industries that copy foreign technology and doesn't produce enough breakthroughs of its own. South Korea was able to keep growing rapidly after it hit a per-capita income level of $5,000—about where China is today—because it pushed innovation. However, China lags behind South Korea badly in patents produced per capita, he said.
Chinese local governments often draw much of their revenue from the sale of land, rather than from taxes. The report urges that Chinese social spending be funded more by dividends from state-owned firms and by property, corporate and other taxes.
Shares of Anil Agarwal-led Vedanta group company Sterlite Industries and Sesa Goa are in News .
Here are few reasons/Views behind the Restructuring of the stocks.
1) Lack of clarity about a restructuring exercise: Media reports indicate that Vedanta Resources (VED) may restructure holdings in group companies. "Vedanta's stated strategy is to simplify and consolidate its corporate structure. Management reviews options to deliver this strategy on an ongoing basis and will update the market as appropriate," the company has said in a statement.
2) Restructuring per se will not impact valuations of the VED Group but valuations assigned to various assets will determine whether value stays at Sterlite or shifts to the parent company, brokerage firm Kotak said in a report. Citing media reports, Kotak says three restructuring scenarios are possible.
3) Vedanta may merge Sesa Goa with Sterlite: Sterlite is reportedly in talks with the government to acquire 49 per cent stake in Balco and 26 per cent stake in Hindustan Zinc (HZ). Sterlite does not have sufficient assets to fund this acquisition. Sesa's cash flow and the debt leverage it can provide can potentially aid acquisition of HZ stake and Balco stake. Such a scenario is neutral at a fair merger ratio, Kotak says. Besides, this might indicate lack of avenues for strategic utilization of Sesa's cash, the brokerage firm adds.
4) Merger of Sesa Goa and complete ownership of Vedanta Aluminium (VAL). This could be negative in case Sterlite has to assume the entire debt of VAL. Fair value impact in such a case could be Rs. 35 per share, Kotak says.
5) Sterlite becomes the holding company for all VED assets excluding KCM: Negative if Sterlite assumes VAL's entire debt. "We compute impact of Rs. 40 per share on Sterlite's fair value with the assumption of (1) merger ratio of 1:2 between Sterlite and Sesa Goa, ratio of market price before speculation of restructuring, (2) acquisition of 40% stake of VED in Cairn India at CMP of Rs390/share and (3) Sterlite assumes VAL's entire debt and does not pay equity value," Kotak says.
6) This value shift can be prevented if (1) VED assumes part of the debt (even if it transfers the entire ownership in VAL), or (2) compensates Sterlite through a favorable merger ratio of Sesa, though Sesa shareholders may object, or (3) sells its stake in Cairn India at a discount to the market price to ensure that Sterlite's minorities are not impacted by any restructuring plan, the brokerage firm adds.
7) Of particular note will be whether value shifts from Sterlite to VED or stays with Sterlite, Kotak notes. This will be determined by the valuation exercise for VAL, a company with combined debt (internal and external) of US$5.5 billion but EBITDA potential of US$200-300 million (without bauxite and captive coal).
8) The Ministry of Environment and Forests rejected VAL's application for the bauxite mine and stopped the expansion phase of the alumina refinery. This has impacted the existing operations and expansion projects. It has a highly leveraged balance sheet (Rs. 276 billion of debt at the end of December 2011 and is essentially surviving on corporate guarantees given by VED and Sterlite. It is difficult to be sanguine on VAL's operations.
10) The management has highlighted its intent to resolve equity holding of Vedanta by March 2012. Dual listing structure is in the offing. Expected structure reduces risk for Sterlite. Merger ratios scenario analysis indicates Sterlite is well below worst case, Macquarie said in its report.
MARK COLVIN: The International Monetary Fund says the world economy is in danger of another 1930s crash.
It would see countries defaulting on their debt and widespread panic on global financial markets.
The IMF forecast came after European finance ministers failed to reach a debt restructuring agreement with private bond holders in Greece last night.
As David Taylor reports there are now just weeks remaining before Greece's economy reaches the point of no return.
DAVID TAYLOR: European finance leaders are running out of time. Last night saw yet another failure of European ministers to negotiate a plan to keep private bond holders at bay.
Key figures from the leadership team commissioned to solve the crisis are no longer shy about where they see things are headed.
CHRISTINE LAGARDE: We could easily, easily, slide into what we call a 1930s moment. A moment where trust and cooperation break down and countries turn inward. A moment ultimately leading to a downward spiral that could very much engulf the entire world.
DAVID TAYLOR: International Monetary Fund managing director Christine Lagarde.
But they're not giving up without a fight.
CHRISTINE LAGARDE: I believe that we can avoid such a scenario. I say this for a simple reason; because we know what must be done.
DAVID TAYLOR: That includes increasing the size of the massive European bailout fund and imposing fire walls around the more robust European economies to prevent financial contagion, a financial contagion that could eventuate if Greece suffers a disorderly default on its debt.
At this point, that's exactly where we are headed.
Last night a group representing private Greek investors met with finance ministers to negotiate new terms for their holdings.
The authorities need the investors to accept some pretty dismal returns on their investments, huge losses to be exact. Understandably they're reluctant to do that but they may have no choice.
Russell Jones is the global head of fixed income strategy at the Westpac Bank.
RUSSELL JONES: To allow that to happen you have to have an interest rate which is comfortable for them. If it's too high, quite simply they will default on their bonds, they won't pay anybody back anything and that's not what the authorities want.
DAVID TAYLOR: But as investors walked away from the negotiating table last night, they increased the chance they'll receive absolutely nothing. That's because Greece is unlikely to receive any more aid money if it's unable to strike a deal with those debt investors. That would leave Greece facing complete financial collapse by the end of March.
RUSSELL JONES: There has to be something done by around the third week in March because at that stage the Greeks have got a very large payment that they have to make.
So that is the absolute deadline for any negotiations on this issue. And clearly they would like to have something in place somewhere before that if they possibly could.
DAVID TAYLOR: And if they don't meet that deadline Greece defaults?
RUSSELL JONES: Greece defaults and not in an orderly way, in a very disorderly way. And the danger with that is it sparks another round of very bad contagion to other countries in the euro zone. They get tarred with the same sort of brush as Greece. It could be a very, very difficult period for financial markets.
DAVID TAYLOR: Fact is strategists at this point are genuinely uncertain about what lies ahead.
RUSSELL JONES: We haven't had a default in a major industrial nation since the Second World War. This is not something we're very used to. It's not something that policy makers are necessarily comfortable with. In fact they're very uncomfortable with it. We don't know what the connotations will be. It's a very uncertain process.
DAVID TAYLOR: What is certain however is what investors are looking for Greece to achieve in the next 10 years, if of course it can make it through the next couple of months.
Berenberg Bank senior economist Christian Schulz.
CHRISTIAN SCHULZ: Is Greece going to be able to regain competitiveness within the euro? Is Greece going to have a sustainable debt level after 2020?
DAVID TAYLOR: Questions that wouldn't carry so much weight if much of the euro zone wasn't dependent on Greece's ultimate economic survival.
The fear is if Greece falls, other, larger economies like Italy will also bite the dust; a scenario nobody can afford.
The IMF will release its latest world growth figures later tonight – figures economists will analyse very closely.
Eurozone crisis live: Greek deal on knife edge
9.01am: Spain has just released GDP figures for the fourth quarter and 2011. Its economy shrank by 0.3% between October and December from the previous quarter (following zero growth in the third quarter), and grew by 0.7% over the year as a whole.
The Bank of Spain also estimates that the economy will contract by 1.5% this year, and return to meagre growth of just 0.2% in 2013.
8.47am: Reuters is reporting that EU ambassadors have agreed to impose an embargo on Iranian oil imports, but decided to postpone the full implementation of the ban until 1 July. The news agency cited a senior EU diplomat.
The EU's 27 foreign ministers, who are meeting in Brussels today, still have to formally approve the ban. EU governments will have to stop signing new contracts with Tehran as soon as the ban is in place, but will be able to fulfill existing contracts until 1 July.
8.43am: The Footsie is now up nearly 20 points at 5749, a 0.3% rise. On the continent, shares have also edged higher, with the Dax in Frankfurt up 5 points and the CAC in Paris 12 points ahead. The euro is trading around $1.2925. Markets are nervous ahead of the eurozone finance ministers' meeting in Brussels, with a Greek debt deal shrouded in uncertainty.
8.26am: Today's meeting of eurozone finance ministers in Brussels has a very full agenda to consider, says Michael Derks, chief strategist at FxPro.
There is the latest draft of the fiscal compact to discuss, a review of the progress made in the Greek debt talks, and a conversation on a draft for the European Stability Mechanism (ESM). The latter apparently includes collective action clauses, although any debt write-offs will need to comply with IMF standards. Germany and France are both keen to wrap up the ESM issue as soon as possible, although it can only take effect once it has been ratified by those countries representing 90% of its capital. It is unlikely that any of these issues will be fully resolved at this meeting, although some progress will be made.
Interestingly, these days the single currency is setting less store in meetings such as these, in sharp contrast to those held in the final quarter of last year. After threatening $1.30 at one stage early on Friday, the euro drifted back to near $1.29.
8.07am: Brent crude futures were steady around $110 a barrel this morning, as concerns about European demand were outweighed by fears over supply disruptions from the Middle East.
Eurozone finance ministers meeting in Brussels today will discuss what terms of a Greek debt restructuring they are ready to accept as part of a second bailout package for Athens.
The debt swap discussions with private creditors have been aimed at reducing Greek's debt to 120% of GDP, from around 160% of GDP. Without a second bailout Greece will not be able to pay back €14.5 bn of maturing bonds in March, which would likely trigger a messy default and could plunge the eurozone into disarray.
EU governments are also expected to agree new economic sanctions against Iran over its nuclear programme today.
Ben Le Brun, market analyst at OptionsXpress, told Reuters:
Both of these meetings are going to be crucial in dictating oil prices. Any indication of a plan getting approved to tackle Greece's debt would support oil. An Iranian oil embargo would also boost prices as demand continues to improve.
8.04am: The FTSE 100 index in London has opened more than 10 points higher at 5739, a 0.2% gain.
Many Asian markets – China, Hong Kong, Singapore and South Korea – were closed for the Lunar New Year holiday. Stock markets that were open for business were mixed, amid light volumes. Japan's Nikkei was flat at 8,765.90.
7.59am: The main event today is the meeting of EU finance ministers this afternoon. Here's today's agenda:
• Franco-German finance and economy council meets in Paris. Press
conference – 10.15am GMT (11.15am CET)
• Eurozone consumer confidence of January – 3pm GMT
• European finance ministers meet in Brussels – 4pm GMT (5pm CET)
• Christine Lagarde gives speech on 2012′s economic challenges -
5.30pm GMT (6.30pm CET)
Bond auctions
• Germany to sell €3bn of 12-month bonds – 10.15am GMT
• France to sell up to €8.3bn of Treasury bills – 1.50pm GMT
7.30am: Good morning and welcome back to our rolling coverage of the world economy and eurozone debt crisis. Hopes of a deal in Greece with private bondholders in time for the eurozone finance ministers' meeting have dwindled after the bondholders' representative, Charles Dallara, managing director of the Institute of International Finance, left Athens on Saturday.
Creditors have made their 'best offer,' and are not willing to take any more than a 65% to 70% loss on the current value of Greek debt (with a coupon of 4%-4.5%, while the IMF has indicated it wants a coupon closer to 3%).
Even that wouldn't be anywhere near enough to tackle Greece's mounting debt burden, says Michael Hewson, market analyst at CMC Markets.
Let's not forget that we started out at a 21% haircut at last July's EU summit and the number has kept going up, at the same rate that Greece's economy has been spiralling down.
It remains unlikely that a deal will be reached by the end of today's EU finance ministers' summit, as originally hoped. Even so Greek officials remain confident that a deal can be reached by the next EU summit on 30th January but time is short, given the deadline of a €14.5bn bond repayment in March.
