More bank funds for stocks on cards
From ad houses to media malls
Maverick in the hot seat
Barons in Web update sessions
New scheme to help small tea growers
DSQworld scouts for partner

 
 
MORE BANK FUNDS FOR STOCKS ON CARDS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept 3: 
In a move to boost investments by banks in capital markets, a joint committee of the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) has recommended that banks’ exposure to the capital markets by way of investments in shares, convertible debentures and units of mutual funds be linked to their total outstanding advances.

The committee comprising senior officials of RBI and Sebi has recommended that within the overall exposure to sensitive sectors, a bank’s exposure to the capital markets by way of investments in shares, convertible debentures and units of mutual funds (other than debt funds) may be limited to five per cent of their total outstanding advances.

The committee stated that the report would be finalised after ascertaining the views of chief executives of select banks which have exposures to the capital markets.

Market circles aver that if the recommendation sees the light of the day it is likely to have a great impact on the bourses. This is evident from the fact that implementation of the recommendations is likely to see an inflow of about Rs 21,300 crore for diversion into the capital markets, since the total outstanding advances as on August 11 were Rs 4,26,012 crore.

Explaining the rationale behind its recommendation to link banks’ investments in shares and debentures to outstanding advances, the committee said the present norm of investing 5 per cent of incremental deposits of the previous year did not reflect the shift in the asset portfolio of banks from a credit to investment.

In view of the shift, the committee recommended that the ceiling prescribed for banks’ investments in shares, debentures and units of mutual funds should be related to outstanding advances and not to incremental deposits of the previous year.

The report, which was submitted to the RBI on August 30, in addition to listing out guidelines for initial public offer (IPO) financing, suggested that banks which lacked in-house expertise for research on capital markets may invest not less than two-thirds of their eligible amount in units of UTI and Sebi-approved mutual funds. The balance one-third may be deployed directly by the banks in listed equity shares, it added.

While suggesting the operative guidelines for investment by banks in the capital markets, the committee’s approach has been to optimise opportunities for banks to take advantage of the returns available from the markets, without exposing them to undue risks arising from volatility in the capital markets.

Further, such a system of banks’ investment and financing of equities is expected to contribute to a healthy development of the financial markets.

Regarding IPOs, the committee stated that the ceiling on the amount of advances as also margins as applicable to advances against shares to individuals, should apply mutatis mutandis to IPOs.

The maximum amount of finance extended to an individual against IPOs should, however, be Rs 10 lakh, as applicable to advances against physical shares.

However, it felt that corporates should not be given advances for IPOs, and is also against banks or non-banking finance companies (NBFCs) lending to individuals for IPOs. Finance extended by a bank for IPOs should be considered as an exposure to the capital market, the report said.

The report said that considering the fact that the minimum margin taken by banks depended upon the scrip and that margins higher than the minimum stipulated by the Reserve Bank are usually obtained keeping in view the price movements for the past six months, the committee felt that the margins stipulated on advances against shares to individuals needed no review.

The committee has recommended that the minimum margin of 25 per cent inclusive of the cash margin, should be stipulated for issue of guarantees on behalf of brokers. The maximum amount of margin to be obtained is however, left to the boards of banks.

The recommendation is made considering it is prudent for the banks to maintain adequate margins which will ensure that the brokers do not build up substantially leveraged positions and at the same time, to enable the banks to minimise their risks.

The committee has recommended that advances against collateral security of shares may be excluded for reckoning the banks’ aggregate exposure to capital market.

Further, the committee has recommended that the board of each bank lay down a prudential ceiling on the bank’s total exposure to the capital market keeping in view its overall risk profile.    


 
 
FROM AD HOUSES TO MEDIA MALLS 
 
 
BY RAJA GHOSHAL & NITHYA SUBRAMANIAN
 
New Delhi, sept 3: 
While information, technology and communication (ICE) stocks are the biggest buzzwords on stock exchanges, IC is now the hottest term in the ad world’s lexicon.

At a time when the genre of communication is becoming more important than what is being communicated, agencies are rushing to adapt to the change.

“We are not an advertising agency in the narrow sense of the term,” says Mike Khanna, chief of HTA, India’s largest agency. “Providing the overall communication needs of clients is our sphere of activity,” he says.

The communication repertoire now extends to corporate communication, direct marketing, market research and event-marketing, even exhibitions, events and seminars. In short, ad firms are turning into a one-stop communications supermarket.

While the biggies still prefer the traditional modes, the smaller agencies are turning innovative by offering a suite of services. HTA, for example, has separate wings for public relations (PR) and market research. Percept, Triton and TBWA Anthem’s offer direct marketing, interactive media, TV commercials, marketing of TV serials, and Web services.

“If you provide solutions to all communications needs, you save a client time and resources,” Percept CEO Navroze Dhondy says.

Achal Paul, general manager of Lexicon Events, echoes a similar sentiment: “Advertising is only one aspect of communications. Today, a client works out not only the cost of a product, but also the promotion costs. While expenditure on advertisements are minimal, spends on below-the-line activities have shot up.”

This has forced agencies to become more multi-faceted. “One-stop communication shops are the trend in future,” says George John, managing director of TBWA Anthem. “Today, it is important for a client and his brand to source his PR, direct marketing, market research, and even below-the-line advertising, from a single agency. It brings synergy to brand identity and promotion,” he adds. But, weren’t many big agencies providing these services all along? “They were, but as separate businesses. Today, all services are central to a brand. That’s the difference,” John says.

However, not all ad agencies are geared to meet the myriad needs. That is where small, niche-bound players come in. “When there is too much outsourcing, agencies often think of having more divisions,” says John. For instance, the interactive media division of Anthem started with designing websites for clients, banner designs, and then progressed to make CD-ROMs. Now, it has taken to designing Web pages and portals.

The other reason smaller agencies rush into expansions is that large accounts are usually held by Big Daddies in the industry. “If an agency is handling advertising for huge brands, it may not necessarily go for in for an integrated communication package,” says John.

The biggies make big money through their 15 per cent commissions. Says Mrinal Dasgupta, senior art director, Triton: “At the end of the day, most agencies still make their money from the 15 per cent commission on releases. The other divisions provide services that are mere add-ons to be sold to the big clients.”

   


 
 
MAVERICK IN THE HOT SEAT 
 
 
BY RAJA GHOSAL
 
New Delhi, Sept 3: 
Navroz Dhondy, the 40-something CEO and executive director of Percept Advertising, is a happy man. The sense of triumph comes from having snatched a lucrative Net account, mantraonline, from Rediffussion DY&R. In a tete-a-tete withThe Telegraph, the self-confessed maverick talks about advertising trends in the new age, internet advertising and IMC —Integrated Marketing Communication.

What made you join Percept?

I am a maverick. That’s a fact. Otherwise, my motivation has always been to make a major difference to the place I go to. That’s what I have set out to do at Percept. I want to move beyond just conventional advertising and follow an integrated approach to communications. The functional divisions at Percept do just that.

What are these divisions?

Percept D’Mark offers direct, event-marketing and celebrity-management services. Then there is Tyger productions, which has done 50-60 ad films, including the first Hindi feature film (Pyar mein kabhi kabhi). Percept Profile is our wide PR outfit. Media House sells space for Gulf News. Team Cybernetics designs websites. We have tieups with Carat Group and Hakuhodo for media planning.

Do you try to sell the entire gamut of services to a client?

No. We go by what the client requires. That may not be what clients think they need. We often tell them that they do not need an ad campaign, that a corporate communication would do. Or, that direct marketing is called for. Percept would prove its mettle as a one-stop agency.

Do you think that Indian advertising will see better times after a recession?

In 1989-99, the industry grew 7 per cent. A year later, it was 22 per cent and I think in 2000-2001, it will be 25 per cent. It depends on the industry. However, advertising thrives on constant innovation.

Have dotcoms fuelled the ad spurt?

Dotcoms have driven growth in advertising, when they are the products. However, internet as a medium for advertising will take a long time to catch up, especially in terms of big money.

Which medium will hold sway?

Print and TV would continue to co-exist. Internet would wean many eyeballs away from TV. It has already nibbled away at the classified ads, financial ads and tenders from print media. Products need to elaborate product features would go to the print. TV would reign over ads for soaps, detergents, eatables, cosmetics et al. The uniqueness of each media is going to stand by it.    

 
 
BARONS IN WEB UPDATE SESSIONS 
 
 
FROM M RAJENDRAN
 
New Delhi, Sept 3: 
Barons who still bank on old-world software to run their businesses will be coached on ways to use the latest internet applications for making their companies nimbler and richer.

The learning sessions, a CII initiative to turn out chief executive officers (CEOs) who are as comfortable with operating ratios as they are with vortals, will tell the movers and shakers of India Inc that they must catch up with the Web, or lose their way in the maze called information technology. The interactions, the first of which will be held in early October, is being organised by TechSpan, an internet consulting company promoted by Arjun Malhotra, one of the co-founders of the HCL Group.

“It is important to keep abreast of the latest developments in the Web world. Most companies fail to recognise that one must adopt the latest technology to be a part of the world market. The seminar will highlight this aspect,” industry sources said. A CII official confirmed plans to hold the series of special seminars for industry icons. “Those who run companies need first-hand information on the nuances of the Net. We hold special sessions regularly to update the skills. Recently, we organised special clinic on e-innovations,” he said.

TechSpan, with annual revenues of more than Rs 300 crore, will initially tell the CEOs how the use of latest internet devices can put them at the forefront of competition. “In India, our aim is to first educate, and then start selling. We are in talks with many industry chambers to do just that,” TechSpan chairman and CEO Arjun Malhotra said.

TechSpan specialises in ‘collaborative commerce’ and plans to evolve into a major player in the e-business integration market in the US and Europe. However, Malhotra feels the Indian market is still not ripe enough for products now being used widely in the US and European business houses.

“In all, 96 per cent of our market share is in the US, and 3 to 4 per cent in Europe. India is not a market for us. At present, we are recruiting professionals here, and training them in the latest software, but once the Indian industry matures, it will emerge as an important market,” he said.    


 
 
NEW SCHEME TO HELP SMALL TEA GROWERS 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, Sept 3: 
The dwindling auction prices of south Indian tea for the last two weeks has prompted the Tea Board of India to announce salvage measures for resolving the crisis.

The new scheme of the Tea Board provides for subsidy of an amount equivalent to the shortfall between the auction price and Rs 55 per kg to the small growers (holding tea area up to 11 hectares) Majority of the south Indian tea producers fall under the small growers category.

The extent of price subsidy by the Tea Board would be limited to a maximum of Rs 8 per kg. An amount of Rs 10 crore has been earmarked for this scheme. At present, the prices of south Indian tea at the auctions are varying between Rs 37-43 per kg. The scheme will be open for a period of six months. The Tea Board will review the auction prices of tea on a weekly basis. The scheme would be withdrawn if the prices cross the Rs 55 per kg - mark consistently during five consecutive auctions.

A senior tea industry official said, “South Indian tea producers are facing extremely tough times. The situation has worsened so much that the banks and financial institutions are refusing to give loans. Russian buying is there but they are opting for low quality tea.”

In the first seven months (January-July) of the current year, domestic tea export has increased by 5.86 million kg to 95.87 million kg as compared to 90.01 million kg in the previous year.

Gautam Bhalla, chairman of the export and marketing sub-committee of the Consultative Committee of Planters’ Association (CCPA) said “We expect that the prices will rise in the next few months. We are taking steps to boost exports to the West Asian and North African countries, the UK and the USA.” The industry is expected to send a delegation, mainly from south India, to Russia next month. Another delegation is expected to tour the USA in October.    


 
 
DSQWORLD SCOUTS FOR PARTNER 
 
 
FROM VIVEK NAIR
 
Mumbai, Sept 3: 
The Dinesh Dalmia-promoted start-up DSQworld.com Ltd is in the process of appointing a consultant to vet the current business model of the company and look out for a strategic partner which will be granted an equity stake.

While the consultants are expected to be appointed shortly, senior officials of the company said, “We will ask the consultants to moot any ideas for improvement of our current business plan. Thus they will be looking at the possibility of any strategic change in the company.”

The sources added that a strategic change may be required in the company as it is now open to the possibility of offering equity stakes to a strategic partner. The partner is being roped in to finance a Rs 250 crore expansion programme in its core business of application service provider and internet service provider.

The present equity capital of the company is Rs 25 crore with most of it being brought by the Dalmias. The plan is to expand it to Rs 100 crore in association with certain strategic investors.    

 

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