Industry fancies debt securitisation
ECL on Met Chem radar
Private insurers meet rural targets
Industry hot on IT backup
Tisco focus on branded steel

 
 
INDUSTRY FANCIES DEBT SECURITISATION 
 
 
FROM SATISH JOHN
 
Mumbai, April 21: 
The Indian financial market is witnessing a surge in securitisation as more sectors of the industry think of using the method to enhance credit.

In 1991-92, when foreign bank major Citibank first introduced the concept in India by securitising a pool from its auto-loan portfolio, and placing the paper with GIC Mutual Fund, the volume was a modest Rs 16 crore.

Since then, the markets have seen transactions in securitised loan portfolios vault to over Rs 14,000 crore. Incredibly, industry circles say almost half the sum has been raised in the last 18 months.

“This is a clear indication that securitisation in the local financial markets is growing leaps and bounds,” Krishnan Sitaraman, a senior Crisil official told The Telegraph.

In fact, more and more sectors are looking at cashing in on the trend. Credit card receivables, two-wheeler receivables, consumer durable receivables, office equipment, hire-purchase receivables, trade receivables and aircraft HP, lease receivables are increasingly looking at securitisation to fund their businesses.

Securitisation refers to the conversion of cash- flows into marketable instruments.

It is a process through which illiquid assets are packaged, converted into tradable securities and sold to third-party investors.

Such securities are referred to as Asset Backed Securities (ABS). Depending on the type of receivables securitised, the instrument is referred to as mortgage-backed securities (MBS) in case of housing loans, collateralised bond obligations (CBOs) in case of bond receivables and collateralised loan obligations (CLOs) for industrial loan receivables.

Typically, a financial intermediary advances a loan to borrowers and gets repayment along with interest over a period of time.

Traditionally, the lender would collect the periodic instalments and wait till the final maturity of the loan to recover his full principal and interest.

Securitisation allows the financial intermediary to sell its right to receive future payments from the borrowers to a third party, the proceeds of which may further be re-deployed in business.

Among the many benefits for the originator is that it helps in up-fronting profits. In case of high-yielding portfolios like car loans and truck loans, there is profit on sale as the inherent yield in the portfolio is typically higher than the coupon rate of the asset backed security (ABS).

Thus, industry watchers expect the growth in securitisation in the coming months to be faster as more and more companies look at innovative ways to generate cash, and at the same time, make profits from it.

   

 
 
ECL ON MET CHEM RADAR 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, April 21: 
Coal India Ltd (CIL) is in talks with Met Chem of Canada for a massive expansion plan in Eastern Coalfields.

CIL sources said the Central Mine Planning and Development (CMPDI) has been entrusted with the task of preparing a project report on the potential for expansion as well as greenfield projects in this loss-making subsidiary.

Met Chem has already carried out an independent survey in the area. Sources said the Canadian firm has shown keen interest in the expansion of the Rajmahal open cast mine.

“While Met Chem has had very advanced level discussions on the proposed expansion of the Rajmahal colliery, it is also looking into the potential of other projects, which are supposed to come up under ECL during the Tenth Plan period,” they added.

Besides Rajmahal, the other major project to come up in ECL is Chuperbhita open cast mines. Sources said both the mines produce excellent quality coal and the reserves are also very strong.

Rajmahal currently produces 14.5 million tonnes of coal and it is proposed to raise production by another 3 million tonnes per annum. Met Chem is expected to make a substantial investment in both the projects and it will also provide technological inputs, sources said.

The two projects, which are yet to get final approval from the government, will also help to deploy ECL’s surplus manpower to a large extent. The company, which has been before the Board for Industrial & Financial Reconstruction (BIFR) for the last eight years, is likely to close down over 26 coal mines that have become totally unviable.

CMPDI, which is currently working on the prospective new projects that will come up in the Tenth Plan period, is believed to have finalised the report for 25 projects out of 35 proposals.

   

 
 
PRIVATE INSURERS MEET RURAL TARGETS 
 
 
FROM GARIMA SINGH
 
New Delhi, April 21: 
Silencing the Doubting Thomases, private life insurers have managed to meet the target of selling 5 per cent of their total policies in rural areas, stipulated by the IRDA.

Anuroop Tony Singh, CEO, MaxNewYork Life said: “The rural market accounted for 7.5 per cent of our total policies sold during 2000-01.” Company officials however refused divulge the details for the 2001-02 fiscal as their accounts are scheduled to be audited next week.

Deepak Mukarji, director-marketing, Metlife India says, “Though we started our operations only this January, we have been able to meet the 5 per cent target as per IRDA stipulations, which comes from our sales in Jammu and Kashmir only”.

According to a study conducted by the Federation of Indian Chambers of Commerce and Industry (Ficci), a whopping 90 per cent of the respondents from the insurance industry believe that the rural sector presents a viable business opportunity. The high and middle-income groups in rural areas seem to be promising enough. These sectors are expected to post a growth rate of 7-10 per cent in the years to come, the study states.

Insurance industry officials feel that rural insurance has not emerged as a very vibrant business area for them. Manoj Jain, Delhi chief for HDFC Life Insurance said: “We are very close to the 5 per cent target and should not have problems reaching it. We have sold our policies in a well-managed way through the NGOs and our travel development executives”.

A senior official from SBI Life Insurance said: “The total premium earned for the year 2001-02 is approximately Rs 15 crore, as on March 31 this year. Though the audit is likely to be completed by mid-May, broadly speaking we hope to achieve the 5 per cent target set by the IRDA”.

Chandrakant Prabhu of Kotak Old Mutual Life Insurance said: “Out of the total 14,000 policies sold till now, we are positive on meeting the 5 per cent target from the rural sector as set by the IRDA”.

   

 
 
INDUSTRY HOT ON IT BACKUP 
 
 
FROM OUR CORRESPONDENT
 
New Delhi, April 21: 
Industry wants Hot Sites—no, it’s not what you’re thinking about.

Fire, earthquakes and other natural disasters can knock any industry out of business—especially those that rely on IT-enabled services. That’s where the Hot Sites come in: they allow a disaster-hit company to function normally by shifting their operations to other IT platforms.

Current legislation does not make the creation of Hot Sites technically or economically feasible. The Confederation of Indian Industry (CII) is hoping to change all that and is lobbying the department of telecommunications (DoT) to allow the creation of Hot Sites that will “make IT-enabled services more competitive vis-à-vis global competition. In case of any disaster, these sites will make business possible as usual.”

CII has submitted a 10-point agenda to DoT to promote Hot Sites. The main focus would be to facilitate an independent organisation, a consortium of call centre companies or a joint-venture, to set-up these sites. The capacity, location and the equipment to be placed in the Hot sites would depend on the number of call centres interested to avail this facility, their connectivity requirements, the kind of technology they use among others.

“In case of any disaster striking the operational call centre, stopping its business operations for more than six hours, the call centre would be able to shift their operations to Hot Sites. During the disaster, the affected call centre should be able to use this infrastructure, which would include facilities such as connectivity, equipment and bandwidth,” CII added.

The chamber has recommended that multiple Hot Sites should be created across the country, based on the demand and need and each state should be allowed to apply for call centre licence according to DoT guidelines. In addition, CII has also proposed “cross mapping of seats,” “sharing of international bandwidth among CUG companies” and amendments to the existing DoT licence with international call centres.

It has also further recommended that call centres should be permitted to have a cross-mapping of seats agreement with one or multiple call centres, anywhere in the country. According to CII, “in the event of a disaster in any call centre, the affected call centre should be permitted to use the infrastructure of cross-mapped call centre including international bandwidth. The call centres should also be permitted to obtain their own international bandwidth at cross-mapped call centre from authorised international long distance service providers, to be used in the event of a disaster.”

According to CII, “Call centres should be permitted to use domestic leased lines from authorised service providers. This link would be primarily used for periodic up date of information between equipment at original call centre location to cross-mapped call centre, so that in the event of disaster, current and up dated information would be available at cross-mapped site”.

The chamber said since most of the call centres serve US-based customers, peak utilisation of bandwidth was during night hours. As a result, during daytime, this expensive bandwidth is grossly under-utilised. Ironically, other business units of CUG companies require bandwidth during daytime. CII has, therefore, recommended to DoT to permit interconnectivity of CUG companies for sharing of international bandwidth by using domestic leased lines from authorised service providers.

   

 
 
TISCO FOCUS ON BRANDED STEEL 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, April 21: 
Tata Iron and Steel Company Ltd (Tisco) has raised its sales target for branded steel to 15 per cent of total sales in volume terms for this year, from 10 per cent notched up in the year ending March 31, 2002.

Tisco currently has two branded products—Tiscon aimed at the construction sector and Tata Shakti in galvanised sheets. While branding of the commodity forms part of a strategy adopted by the company in the tough environment, Tisco officials said revenues from the sale of branded products will be significantly higher than that generated in the previous year.

Apart from Tisco, other companies such as Essar Steel and Jindal Pipes have also to branding. “Cement is a classical example where branding has succeeded in the commodity segment,” an official from a leading steel firm said. He said the concept is now just catching on in the steel industry, it is soon likely to see “ingredient branding,” already witnessed in the PC industry.

   
 

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