StanChart buys 12% in Redington India

Mumbai: The private equity arm of Standard Chartered has bought 12 percent of Redington India from a promoter and a strategic investor for about $98 million, the supply chain management company's managing director said on Monday.

A promoter and Taiwan-based Synnex Technology International Corp , a strategic investor in the firm, have cut their stake in Redington, R. Srinivasan said on television channel CNBC TV18.

A source with direct knowledge of the deal at StanChart PE, who asked not to be named, also confirmed the purchase.

The purchase, executed through the block deals window on the Bombay Stock Exchange (BSE) on Monday, was at a 3.3 percent premium to Friday's closing share price.

A total of 47.63 million shares of Redington, amounting to a 11.97 percent stake, changed hands at 91.90 rupees.

At 11.30 a.m., shares of the Redington, which the market values at $791.69 million, were down 0.51 percent at 88.50 rupees in a firm Mumbai market.

Source: Financial Express

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RBI fines Citibank Rs 25 lakh in fraud case

Mumbai: The Reserve Bank today imposed a penalty of Rs 25 lakh on US-based Citibank for not following account opening and anti-money laundering norms at its Gurgaon branch, which witnessed a fraud of Rs 461 crore last year.

"The failure in following the Know-Your Customer (KYC) Anti-Money Laundering (AML) guidelines while opening accounts led to the perpetration of a fraud at its Gurgaon branch," the central bank said.

Several depositors and high-networth individuals (HNIs) were duped in the Rs 460.91 crore fraud, engineered by a Citibank's Global Wealth Manager Shivraj Puri who was working at Gurgaon branch of the bank.

Following investigations, the RBI came to the conclusion "that the violations (at Gurgoan branch of Citibank) were substantiated and warranted imposition of the penalty".

No immediate comments could be obtained from Citibank.

The RBI had earlier issued a show cause notice to the bank in April and heard the bank officals on the issue last month.

The Haryana police has filed chargesheet against the fraud accused and capital market regulator Sebi too probed the matter as the fraud money was invested in the stock market.

As per a Sebi report, mastermind of Citibank fraud Shivraj Puri took an exposure of whopping Rs 1.13 lakh crore in the equity market using Rs 236 crore of 51 high networth individuals and corporates and lost everything following decline in stock markets.

Source: Financial Express

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IDFC steps on the gas, but sees macro headwinds

Managing Director Rajiv Lall says the company would stick to its approach of financing the top 20 companies.

Though the view of the Mithi river from his cabin is breathtaking, Rajiv Lall doesn’t seem to have the time to enjoy the scenery. The managing director of Infrastructure Finance Development Corporation (IDFC) is in the midst of a massive exercise started last year, which could be his biggest challenge in the six years he has spent at the company.

About a year ago, IDFC decided to almost treble its loan book to Rs 1 lakh crore in two to three years. The company looks to be well on course to achieving this target. The loan book rose to Rs 47,554 crore in the last financial year from Rs 32,562 crore a year ago, a growth of 42 per cent.

IDFC had shifted to various other businesses in the last five years. However, the management figured fee income could not grow beyond a point if expansion of the core book was limited.

Lall says while everything is still on course, the hazy macro outlook has made things difficult lately. Environmental concerns, the lacklustre performance of the government in infrastructure development and rising interest rates have already slowed the growth of the infrastructure sector. The global investor community is clearly not satisfied with the kind of barriers that infrastructure developers are facing. “Foreign investors always believe in herds and right now, the herd is running the other way. The perception is we are not a business-friendly country for infrastructure,” says Lall. The feeling, he says, is wherever the Union government's intervention is required, progress is hampered. On the other hand, work on state highways has recorded progress in states like Gujarat, Madhya Pradesh and Rajasthan. In the development of ports, both container and bulk traffic has moved disproportionately to state level ports and the 12 national ports are seen losing market share.

Elephant hunting

IDFC is known to have a select group of borrowers, with around 66 per cent lent to the 20 top rated companies. This has resulted in near-zero per cent delinquencies over the last few years. And Lall prefers it that way. “Diversification of risk does not mean lending to 50 or 100 people and diversifying the risk. In infrastructure, in Tier-II or Tier-III companies, the risk escalates exponentially. We have, by design, chosen to concentrate on only 20 groups so far, even it means lower profits from our lending business. The core book should be safe, rather than an asset quality problem,” said Lall, explaining what he calls IDFC's “elephant hunting” approach. IDFC typically conducts 10-15 transactions a year. The strategy is to offer the borrower products through its private equity and investment advisory arm, which also generates fee income. The 'one firm culture', which IDFC has evolved over the last few years, is a key to the success of its 'elephant hunting' business model. Lall claims no other financial group in the country offers the entire bouquet of products to clients.

Rate hike fears

Currently, IDFC is concerned rising interest rates have led to investment decisions being postponed by infrastructure companies. Lall says a disproportionate burden to tackle inflation has fallen on the Reserve Bank of India, since the government did not cut down on its non-productive expenditure. “The situation is worse than what I had envisaged three months earlier,” he says. IDFC, which had grown its balance sheet by 42 per cent in the last financial year, now says in the current environment, even a 20 per cent growth would be decent.

Lall is, however, unwilling to accept the argument that IDFC has not carried out enough infrastructure financing, reeling out figures to prove his point. Today, IDFC is the largest financer of private infrastructure in the country and the seventh or eighth-largest project financier in the world. Since its inception, it has financed 23,000 mw of power generation capacity. It is also the largest financier of renewable energy in the country. “We have a balance sheet and equity exposure that is larger than Ireda's (Indian Renewable Energy Development Agency) in renewable energy,” he says. “We are almost half of the Power Finance Corporation's balance sheet size,” Lall says, adding IDFC's balance sheet, at $10 billion, is one-seventh of the total bank lending to infrastructure. “You must remember: What banks call infrastructure, is not necessarily that,” he says.

On allegations of IDFC focusing more on fee income generating businesses, Lall says the argument misses the woods for the trees. The investment bank and private equity businesses and, to a lesser extent, the mutual fund business, have all helped IDFC in the infrastructure business.

Source: Business Standard

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Major PSU banks likely to raise lending rates soon

NEW DELHI: Major public sector banks, including State Bank of India , Punjab National Bank and Bank of Baroda , are likely to soon raise lending rates making home, auto and commercial loans expensive.

As many as a dozen banks, including private sector leader ICICI Bank have already hiked their lending rate by 25 basis points in response to the tightening of monetary policy by the Reserve Bank last month.

It is a matter of time that other lenders would follow the suit as cost of fund has gone up following the 25 basis points increase of key policy rates by the Reserve Bank on June 16, experts said.

The RBI hiked key short-term lending and borrowing rates by 25 basis points (0.25 per cent) each with immediate effect to tackle inflation. The short-term lending (repo) rate rose to 7.5 per cent and the borrowing (reverse repo) rate at 6.5 per cent.

Few banks which have substantial CASA (Current Account Savings Account) deposits do have some neturalising impact on rise in cost of fund. However, these banks will have to raise rates soon to stay competitive in the market, experts said.

Besides, banks would raise rates in order to protect their Net Interest Margin (NIM), they added.

In response to tight money supply by the RBI, banks started raising lending rate.

Yesterday, ICICI Bank increased lending rate by 25 basis points raising cost for those who had taken advances on floating rate of interest.

Besides, leading public sector lender Canara Bank also raised lending rate by 25 basis points. Other state-owned lender Indian Overseas Bank and Dena Bank have also announced increase in their lending rates by similar margin.

Earlier this week, Corporation Bank also raised base rate or minimum lending rate by 25 basis points.

Source: EconomicTimes

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Pandit’s payouts climb to $200 m

Citigroup chief executive officer Vikram Pandit, who took a $1 salary after his bank received the most taxpayer assistance of any US lender, is poised to collect $80 million from other payments and awards that may eventually total more than $200 million.

Pandit, 54, will get the $80 million from Citigroup’s purchase of his Old Lane Partners LP hedge fund on Saturday, according to regulatory filings. The deal brought him to the lender in July 2007. JPMorgan Chase, which remained profitable through the financial crisis, has disclosed about $90 million in awards for CEO Jamie Dimon since 2007.

“Pandit, his $1 pay notwithstanding, cannot be considered modestly paid,” said Graef Crystal, a compensation expert and Bloomberg News consultant based in Las Vegas. “Taxpayers saved this bank, and he’s getting a bundle while shareholders are getting shortchanged on the stock price.”

Pandit’s $80 million is the last of the $165 million New York-based Citigroup agreed to pay for his share of Old Lane four years ago. The bank has since awarded him compensation, including stock and options, worth about $63 million when he received them. In May, he entered into a company profit-sharing plan which will give him an additional $25 million if the company meets analysts’ estimates.

The Old Lane payment also caps the end of six months in which Citigroup shares have fallen 12% amid investor concern that bank earnings will decline, placing the lender 13th on the 24-company KBW Bank Index. The shares have fallen about 92% since the Old Lane deal closed and 87% since December 11, 2007, the day Pandit was appointed CEO.

His own stake has suffered on his watch. Pandit’s shares and options are currently worth about $26 million, most of which is linked to awards the bank gave him in May of this year, according to an analysis by Crystal. Share awards from 2008 have lost most of their value, Crystal said. One period of Pandit’s tenure that Crystal studied was this year through May 17, when Citigroup’s compensation committee— chaired by former Alcoa Inc. CEO Alain Belda—awarded Pandit $10 million in deferred stock, entry to a company profit-sharing plan and stock options that Crystal valued at more than $10 million. Citigroup shares fell 12% during the period. The Standard & Poor’s 500 Index, which tracks the performance of 500 US stocks, gained 5.7%.

“This raises the interesting question as to why the comp committee decided the war was over and it was time to stage a victory celebration,” Crystal said.

Shannon Bell, a Citigroup spokeswoman, declined to comment. JPMorgan’s Performance JPMorgan has awarded Dimon, 55, about $90 million since 2007 including stock and options, according to filings, which don’t outline amounts for future awards. New York-based JPMorgan’s shares have declined 17%since the day Pandit sold Old Lane to Citigroup, making the firm the fifth-best performer on the KBW Bank Index during the period. Citigroup was the worst-performing.

The US treasury department provided a $25 billion bailout to JPMorgan in 2008. The bank, the second-largest in the US, repaid the funds in 2009 with a $1.75 billion profit for taxpayers. The lender’s profit for 2011 may be $20.8 billion, according to a survey of analysts.

Pandit replaced CEO Charles 'Chuck' Prince, 61, who resigned as the bank faced billions of dollars in losses linked to subprime mortgages and related securities. Under Pandit, the bank posted $29.3 billion in losses in 2008 and 2009. The US Treasury bailed out the company with a $45 billion cash injection and a guarantee of more than $300 billion of its riskiest assets. Some analysts credit Pandit with steering the third-largest US bank toward five straight profitable quarters since then as he boosted lending in emerging markets in Asia and Latin America and shrank the amount of toxic assets the company was carrying on its balance sheet.

The strategy enabled Pandit to pay back the Treasury’s bailout funds and deliver a profit to taxpayers of about $12 billion. The firm may post a $3.1 billion profit for the second quarter and is on course to make a $12.6 billion profit for the year, according to a survey.

Shareholders may benefit. Pandit, who reinstated a 1-cent dividend in May, could introduce an 80-cent payout in 2012, about $2 billion in total, and buy back up to $4 billion of stock, according to London-based Richard Staite, an analyst with Atlantic Equities, who rates the shares ‘overweight’.

“If Dick Fuld had been able to pull it off, how much would they have wanted to reward him?” said David Knutson, a Legal & General Investment management credit analyst, referring to the former CEO of Lehman Brothers Holdings, which collapsed in 2008. Pandit “has brought the bank back from the brink.”

Citigroup has sold about $300 billion of troubled assets in Citi Holdings, the unit Pandit formed to house and offload the bank’s most distressed businesses and investments. The division still had $337 billion in assets at the end of March, much of it tied to US mortgages, store-branded credit cards and securities.

If Pandit can wind down and sell the rest, regulators may consider the lender less risky than JPMorgan and Bank of America, according to Charles Peabody, an analyst with Portales Partners. “$80 million is a drop in the bucket relative to what he’ll get going forward if he turns this thing around,” Peabody said in an interview.

Pandit isn’t the only Citigroup executive who has been waiting four years for the last round of Old Lane payouts. Chief Operating Officer John Havens will also get $80 million, while Chief Risk Officer Brian Leach will get $8.6 million, filings show.

Source: Financial Express

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