SBI Capital looks to expanding mergers business

SBI Capital Markets Ltd, the investment banking subsidiary of State Bank of India, expects its mergers and acquisitions business to account for 30-40 per cent of its topline in the next three-to-four years. Close to 95 per cent of SBI Caps' total business comes from debt syndication at present.

The company – which sees a huge potential in mergers and acquisitions in areas like automobiles, pharmaceuticals, power and FMCG in countries like Australia, Indonesia and Mozambique – has created specific verticals and is in the process of training its manpower to leverage M&A opportunities in individual verticals, said Mr S Vishvanathan, managing director and chief executive officer, SBI Caps.

“There are lots of opportunities on the M&A front and we hope to increase our revenues from this sector. The segment is growing but it will take sometime. Our team is working on it. While our overall pie is also growing we want to increase our business from this segment,” Mr Vishvanathan told Business Line.

SBI Caps has been instrumental in various deals like the Rs 212-crore acquisitions of European company Danstoker and its German subsidiary by Pune-based Thermax Ltd and the Rs 1,300-crore acquisition of German multinational Dystarfor by Ahmedabad-based Kiri Dyes and Chemicals Ltd last year. The company is also believed to have helped Adani Group owned Mundra Port and Special Economic Zone to acquire Abbot Point Port in Australia in a $1.96-billion deal.

“Close to three-to-four deals are in the pipeline and might take shape soon. There are opportunities in coal and iron ore mine acquisitions,” Mr Vishvanathan said.

To facilitate M&A in individual sectors, SBI Caps has created 3-4 member teams in separate verticals like infrastructure in the areas of power, oil and gas and non-infrastructure sectors like auto, FMCG, hospitality, hotels.

The company will also leverage State Bank of India's banking relationship with Indian companies. “Being the largest loan syndicator in the world and having relation with almost every infrastructure provider in the country gives us an edge over others. We also have the benefit of SBI's relationship with large, mid and small corporates. Once SBI gets into anything then immediately the scale goes up because of our huge relationship and network, it is just that we are not adequately leveraging,” Mr Vishvanathan said.

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Don't charge for account closure: RBI

The Reserve Bank of India has directed banks not to charge fees from customers closing their accounts due to change of employment or transfer to another city.

The implication of this circular is that such fees can be levied if customers are closing accounts only to switch banks so as to cash in on better interest rates.

(The author is a New Delhi-based chartered accountant.)

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Bill to raise Exim Bank capital to Rs 10,000 cr passed

Parliament on Tuesday passed a bill to increase the authorised capital of Export Import Bank of India (Exim Bank) from Rs 2,000 crore to Rs 10,000 crore.

Introducing the Export Import Bank of India (Amendment) Bill, 2011, in the Upper House, Minister of State for Finance Mr Namo Narain Meena said it seeks to authorise the government to raise the authorised capital of the bank in future through a notification.

The Lok Sabha had approved the Bill on December 21.The bill also seeks to increase the number of executive directors in the bank to two from one at present.

Replying to the debate, Mr Meena said the Exim Bank had issued 180 Lines of Credit (LOCs) to 53 countries worth $6.3 billion till March 31 this year and will be issuing loans worth $5 billion to Africa as promised by Prime Minister Dr Manmohan Singh during his trip to Ethiopia.

Rejecting criticism that rate of lending loans was less than that of growth rate of exports, he said, “The growth rate of lending has been 24 per cent whereas the growth rate of Indian exports has been 21 per cent between 2001-02 and 2010-11.”

The Minister agreed that the percentage of loans to be granted to small enterprises was 2.6 per cent of total loans issued and there was need to increase it.

On the non-performing assets of the bank, Mr Meena said it was only 1.4 per cent of the loans worth Rs 46,000 crore issued by the bank.

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NHAI plans electronic toll collection from next year

The National Highways Authority of India (NHAI), which is set to launch its first-ever tax-free public issue of secured redeemable non-convertible bonds (NCDs) on Wednesday, said it plans to roll out the electronic toll collection (ETC) system across the country in 2012.

New system

ETC will replace the existing cash-and-receipt tax payment system, Dr J.N. Singh, Member (Finance), NHAI, told reporters here on Tuesday. The vehicles' number-plates will be electronically-recorded and tax collected through a specially-created credit card for making such payments.

The tax thus collected would then be transferred to the account of the respective toll booths, he said. Currently, the people pay toll tax after an average of 60-70 km stretch of road. The ETC system, preliminary preparations for whose launch have been completed, is expected to make toll tax payment easier and faster as in the developed countries, Dr Singh said. Currently, India has 41 lakh km of roads, of which NHAI's share is 71,722 km. The State Highways are 1.66 lakh km long.

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Travel insurance premiums may rise with falling rupee

Travellers may have to shell out more for their outbound travel expenses as travel insurance bills may rise due to the sliding rupee.

The claims for outbound travel insurance are paid out by general insurance companies in foreign currency while the insurance companies collect premium in rupees.

The record decline in the value of the Indian rupee has hit the travel portfolio of travel insurance companies, said experts in the insurance industry.

The fall in the Indian rupee, which has seen a depreciation of 22 per cent against the US dollar, from the levels of 44.46 in January 2011 to 54.29 in December, is proving to be a major concern to the travel insurance industry. And analysts estimate that the year 2012 could continue to be a tough for the rupee and it could continue trading in the broad range of 50-54, with some analysts predicting that it may touch 58.

The main claims that insurance companies incur in the travel insurance portfolio is towards emergency medical expenses.

“At present travel insurance market is very competitive in India. One can get a cover for $50,000 for as low as Rs 400 (excluding the US),” said Mr Vikramjeet Singh, Head-Travel Insurance, Bajaj Allianz General Insurance.

“We have priced our premiums with the rupee being at levels of 44/45 and this sharp depreciation in the rupee will force us to think about how long we can continue with premiums at this level,” said Mr Neelesh Garg, Executive Director, ICICI Lombard GIC Ltd.

Insurers travel portfolio hit

“The hit in the travel insurance portfolio is proportionate to the decline in rupee. So an upward revision in premiums rate is on the radar if the current levels of the rupee continue,” said Mr Karan Chopra, Head- Retail Business, bERGO.

So, non-life insurers are faced with a hit of almost 15 to 20 per cent in this portfolio due to the fall in the rupee.

Travel insurance industry is an estimated Rs 300 crore market for the Indian general insurance industry. The travel insurance figures are clubbed with health insurance figures (a much bigger market) in the industry data available.

According to tour operators and insurance companies, Indian outbound travel has seen a double-digit growth over the last few years.

The number of Indians travelling overseas crossed the 12-million mark in May 2011 and is expected to touch 50 million by 2020, the latest industry survey says.

Insurance companies have a specialised product portfolio with travel insurance plans customised for individuals, family floater, senior citizens, and students and for business travellers.

deepa.n@thehindu.co.in

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