February 23, 2009
If the ongoing recession was not enough to dampen the spirits of the investors as well as the economy, the Satyam crisis added fuel to the fire. However, the fund managers in Bangalore have got a reason to smile, despite the general gloom. The reason is that it is after a period of one-and-a-half years that Infosys Technologies, the country’s second largest IT/ITeS exporter, has decided to reinvest in mutual funds. It is believed that Infosys Technologies will invest around Rs 160 crore into liquid schemes with four mutual funds.
According to Infosys CFO, V Balakrishnan, the company’s investment in mutual fund is an ongoing treasury/investment activity. The company decided to revisit the mutual fund market because the yields on liquid schemes have begun to improve recently.
Not only for the company, this is a good news for the investors as well. Infosys Technologies is a brand in itself and people associating themselves with it are sure to expect good returns in future. Investors are also happy because they will have a secure option to invest their money. Liquid funds are not only considered as an alternate to short-term fixed deposits, but the dividends from liquid funds are also tax-free in the hands of the investors, unlike the bank fixed deposits.
Mutual fund market, which had suffered a major set back during recession is sure to bounce back with Infosys jumping into the play. The reason is that other companies will also take some action witnessing the step taken by Infosys.
The action has already started with Taurus mutual fund introducing a new concept in the Indian mutual fund industry. Taurus launched its Taurus Ethical Fund. It is India’s first equity oriented Shariah compliant mutual fund, wherein investment will be made only in a universe of 152 companies in compliance with Shariah norms.
Even the Unit Trust of India (UTI) is planning to use the SMS service in mobile phones to deepen and widen its penetration, especially in rural areas. UTI is taking this step after the success of its strategy to use ‘dabbawallas’ for promoting sales of its mutual funds.
For the Infosys employees, it is a welcome step. The reason is that besides the higher rate of interest on bank FDs, MF is also being used for tax planning. The tax deducted at source (TDS) by the banks could be used to set off against the minimum alternate tax (MAT) liability of corporates. Lesser liabilities will account for more profits.
The Mutual fund industry analysts believe that Infosys might invest around Rs 1,200 crore to Rs 1,500 crore of incremental cash flow into such funds before the end of the current quarter. This will improve the situation even more.
February 16, 2009
The UPA government’s last Railway Interim Budget (2009-2010) in its ongoing term has been announced by the Railway Minister, Lalu Prasad Yadav. Recording a whopping Rs 90,000 crore profit, the Indian Railways stands out as one of the most profitable sectors even amidst recession.
Although the Sixth Pay Commission is likely to increase the expenses of the Railways by Rs 13,500 crore in 2009-2010, it is not going to affect the profit ratio significantly. This is due to the probability of making more revenues by the Railways owing to a fall of 2% in all AC and mail train fares. Also, the future prospects of Indian Railways are looking quite bright, as there has been a 14% growth in passengers traveling by train. This is surprising, as the recent trend suggests that more and more people are developing a likability towards traveling by airplanes. However, now we can say that there is still a large section of the Indian population who cannot afford to travel by plane and railways would always be a prime necessity for them. Also, the recent efforts of the railways to offer a more hygienic environment to all passengers, both at the platforms and inside the trains, have become quite successful in tilting the balance in favor of traveling by trains.
To complement the growth figures in railway revenues and also the future growth prospects, Lalu Prasad Yadav announced some developmental projects, requiring a total outlay of Rs 35,900 crore. This would include building more capacity in all passenger trains, creating 88% more capacity in all goods trains, setting up of 4 Railways inquiry call centers, undertaking research work on bullet trains, creating connectivity of railways to Kashmir, increasing the frequency of trains on each line, and many more such tasks. In fact, there would be an investment of Rs 2,30,000 crore in the 11th Plan.
Having invested Rs 70,000 out of its surplus, the Indian Railways has shown a remarkable growth last year, which is likely to improve over time. With an increase in revenue by 39 paise and a fall in costs by 7 paise per tonne/Km since 2001, Indian Railways promises to generate more revenues in coming years. Also, the electrification of 1000 kilometers of rail lines has been successfully completed. It is not only the efficiency that has increased, but also the effectiveness of Indian Railways. The evidence to this fact is a fall in the number of train accidents from 325 in 2003-04 to 194 in 2007-08. However, more efforts are still required to bring down this number to zero.
However, Karnataka’s Chief Minister showed his complete dissonance over the Railway Interim Budget. Even industry experts criticized the budget as merely rhetoric, with no intention to offer some impetus to the sagging industrial growth. In fact, there should have been an announcement on freight charges. A good percentage reduction in freight rates is absolutely necessary to give a boost to the economy in this global slowdown.
February 9, 2009
Salvaging Satyam Computer services and cleaning up its mess is not a cake walk for the newly appointed chief executive officer A S Murty and chairman Kiran Karnik. The reason is that Satyam issue involves the livelihood of 53,000 employees and investment of three lakh shareholders. Moreover, Satyam has been debarred by the World Bank and has also been suspended from the vendor database of the UN Secretariat.
The trauma of the flailing IT company does not end over here. Satyam is also losing its big clients. Assurant, a Fortune 500 firm (ranked 309) and Visa Inc, the world’s largest electronic payment gateway, have both severed off their contracts with Satyam in the last two weeks. The company has also lost some of its clients from its New York Stock Exchange profile.
Insurance major Assurant, which manages over $25 billion assets and has annual revenues of $8 billion, has moved the work Satyam had been managing for it to another Indian IT company—Zensar Technologies. Global payment, on the other hand, has severed its ties with the company owing to the World Bank’s revelation of an 8-year ban on Satyam.
The reduction in the client base of the company is an issue of serious concern. Employees are worried about their job and salary, while the shareholders are concerned about the return on their investments. I know what the employees are going through because I have a friend who is working in Satyam. Their fear is that if two of their clients can sever off, other can also take the same step. That would further worsen the condition of the company.
The new CEO has installed some faith in the hearts of the employees and shareholders. It is because he plans to chart a precise and practical 30-60-90 day plan that will encompass and address the interests of all stakeholders. The company aims at working together its board, special advisers, and the Boston Consulting Group to achieve its plan within a week’s time. Not only this, salary to its staff is among its top priorities. The procurement of a bank loan of Rs 600 crore marks the first step towards this plan. Both the employees and the shareholders are now believing it to be a new beginning of the company.
The World Health Organisation’s (WHO) statement that it found no evidence of fraudulent practices by its vendor Satyam has further instilled confidence in the minds of the people. However, WHO is reviewing carefully its current contractual agreements with Satyam. WHO is also making contingency arrangements in case Satyam is not able to complete its GSM project work on time.
At the time, when the company is trying to settle down all its issue, the act of our political parties is disheartening. The ruling UPA and opposition NDA are indulging in mudslinging over the Satyam scam, with the two sides charging each other with the involvement in the country’s biggest financial fraud.
It’s high time that our political parties rose above the party politics and did something to support the nation as a whole.
February 2, 2009
The global recession may have hit the economies badly, but it has brought along a reason to smile for the Ambanis. Hong Kong-based journal, Asia Asset Management has named Reliance Mutual Fund as the country’s best fund house for 2008. According to this international publication, Reliance Capital Asset Management showed an impressive growth in the domestic as well as international market even in the midst of the ongoing global economic crisis. And their commitment to serve the industry is the reason behind bestowing this honor on them.
The publication has also named Vikrant Gugnani, the CEO of Reliance Mutual Fund from October 2005 to December 2008, as the best CEO in the MF industry. Currently, he is the CEO of International Business of Reliance Capital.
Reliance Mutual Fund manages a corpus of over Rs 70,208 crore in the country and has over 71 lakh investors as on December 31, 2008. I was elated with the news because I have invested in Reliance Mutual Fund. And this recognition will make the company more committed towards serving its investors with better products and services.
Investing your hard earned money in mutual funds is always better than investing them in shares. It is because mutual funds collect money from millions of investors and therefore, they achieve economies of scale. Mutual funds are typically very liquid investments. Unless they have a pre-specified lock-in period, your money will be available to you anytime you want.
Moreover, mutual fund companies offer you the services of a qualified fund manager who diversifies your investments in different sectors. If you invest most of your savings in a single security or one investment becomes very large in your portfolio, you are exposed to the risk that is attached to those investments. For instance, if you have Rs 2 lakh, you will be able to purchase only some shares of a reputed company belonging to a particular sector. And if that sector goes down or that company suffers a loss, you also stand to suffer a huge loss. On the other hand, a fund manager efficiently invests your limited funds in different sectors so that even if one sector is down, your investments do not suffer as much.
So, I feel that this recognition offered to the Reliance Mutual Fund has enhanced its reputation in the eyes of the investors. Now, more and more people will be attracted to invest in the company, further strengthening its position in the market.
