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Inflation nears 4.5 pct, rates seen steady
By Surojit Gupta

NEW DELHI (Reuters) - Inflation ticked up to 4.35 percent in early February, a six-month high, and analysts said with the impact of higher fuel prices to come interest rate cuts anytime soon were unlikely despite slowing growth.

Official data released on Friday showed the wholesale price index in the 12 months to Feb. 9 rose at a pace comfortably above the previous week's rate of 4.07 percent and a median forecast of 4.11 percent in a Reuters poll of analysts.

Inflation is still below the central bank's comfort level of 5 percent but is expected to head up further in coming weeks with high food and commodity prices at home and in global markets posing a risk.

"The numbers are definitely higher than expectations and with the fuel price hike showing up in headline numbers from next week, inflation seems to be on an uptrend and may reach the 5 percent mark very soon," said A. Prasanna, economist at ICICI Securities in Mumbai.

India raised retail prices of petrol and diesel by around 4 percent last week to cut losses at state-run oil firms, which sell fuels at below-market rates and which had been squeezed by a surge in the cost of crude .

"Inflation still remains the predominant concern given elevated commodity prices, including crude, primary products, and other commodities," said Shuchita Mehta, chief India economist at Standard Chartered Bank in Mumbai.

"Hence, expectations for rate cuts in the near-term are premature."

The higher inflation number pushed the yield on the 10-year federal bond up to 7.60 percent from 7.59 percent earlier, but the partially convertible rupee remained unchanged at 39.967/977 per dollar.

The central bank raised interest rates five times in 10 months from June 2006 to tackle inflation and credit growth in Asia's third-largest economy and kept them steady last month saying inflation risks persisted.

Reserve Bank of India officials said earlier this month inflation was still high by global standards and needed to be brought down, while RBI Governor Yaga Venugopal Reddy said the "inherent logic" of January's rate decision still held ground.

India's statistics office has said the economy was expected to expand 8.7 percent in the fiscal year ending March 2008, slower than the previous year as higher interest rates dent consumer demand.

market in deep red. whole globale market in red.very sad & boring weekend

REC IPO subscribed 14 times

Mumbai, Feb 22: The Initial Public Offer (IPO) of state- run power sector lender Rural Electrification Corporation got subscribed by over 14 times of the issue size, as per the data available with the NSE.

The IPO received bids for Rs 219.65 crore equity shares, against Rs 15.61 crore shares on offer.

The issue, expected to raise Rs 1,640 crore, closes for subscription today.

The company`s maiden public offer got subscribed 4.13 times of the issue size till yesterday, with most of the bids pouring in from institutional investors.

REC has fixed the price band for the issue at Rs 90-105.

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BoB cuts lending rate by 50 bps to 12.75 pc

Mumbai, Feb 22: In line with leading PSU bankers like State Bank of India and Canara Bank, Bank of Baroda on Friday said it will slash its benchmark lending rate by 50 basis points to 12.75 per cent.

The reduction in Prime Lending Rates (PLR) is likely to moderate lending rates for borrowers of all categories , including housing (floating rate), corporate, car loan etc.

The reduced PLR would come into effect from February 27, the bank said in a filing to the Bombay Stock Exchange.

The bank said rate cut has been undertaken "to stimulate demand for consumer and investment credit in a slowing economy".

On Wednesday, SBI and Canara Bank cut their lending rates by 0.25 per cent each to 12.25 per cent and 12.75 per cent respectively.

Earlier, Housing Finance Companies HDFC and PNB Housing Finance had reduced interest rates on housing loans.

The RBI Governor Y V Reddy, while announcing the quarterly monetary policy review on January 29, had asked bankers to explore the possibility of reducing interest rates.

Also, last week, Finance Minister P Chidambaram had asked the public sector banks to ensure adequate loans for housing and consumer durables, as these areas have been partly affected by a "conscious" moderation in credit flow over the past one year.

"Consciously, over a period of a year, there has been a slowing down of credit growth... However, this slowing down of credit has indeed, to some extent, affected flow of credit to the housing sector and consumer durables sector," the Finance Minister had said after a review meeting with PSU bankers.

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REC IPO generates interest for Rs 42,000 crore

Mumbai, Feb 22: The Initial Public Offer of state-run power sector lender Rural Electrification Corp has generated a demand for over Rs 42,000 crore, with the issue getting subscribed by more than 27 times, as per the latest figures available with NSE.

The issue received bids for 433 crore equity shares as against 15.61 crore shares on offer in the price band Rs 90-105 per issue.

Calculated at a median issue price of Rs 97.5 per share, the offer generates a demand of over Rs 42,200 crore.

As per National Stock Exchange figures, the IPO got subscribed 27.76 times the issue size at 1900 hrs.

According to merchant banking sources, the portion reserved for institutional investors was subscribed 40 times.

High net-worth individuals bid for shares worth 23 times the portion meant for them. The portion for retail investors was subscribed by over 5.69 times the issue size, while the employee portion was fully subscribed.

Expected to raise Rs 1,640 crore at the upper end of the price band, the IPO was fully subscribed within 27 minutes of the opening on February 19.

The issue constitutes about 18.18 per cent of the fully diluted post-issue capital of REC. ICICI securities and SBI capital markets are the book-running lead managers for the issue.

REC proposes to utilise the net proceeds from the fresh issue to augment its capital base to improve its borrowing capacity.

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Mahindra & Mahindra to roll out Ingenio by August

Mumbai, Feb 23: Utility heavyweight Mahindra & Mahindra (M&M) is sprucing up its portfolio to cater to consumers across the market spectrum. Primarily seen as a mid-segment player, M&M is planning to launch a premium SUV (codenamed W201) by 2009 and the Ingenio MUV (positioned between the Bolero and the Scorpio) by end August this year.

The multi-utility vehicle (MUV) Ingenio—the most ambitious project of the company after Scorpio—will be rolled out from its Nashik plant, and will be introduced in several overseas markets. While the company is yet to take a call on pricing, industry sources indicate that it will be around Rs 6 lakh.

The multi-variant Ingenio will initially have a diesel engine followed by a petrol engine and an automatic transmission variant. The top-end Scorpio (VLX) currently retails for around Rs 10.5 lakh (on road). Analysts indicate that M&M has always been keen to be a strong SUV player, and that is why it was eyeing Ford’s Land Rover facilities. Industry sources feel that Scorpio sales are under pressure, but M&M officials say that the Scorpio retails around 3,200-3,300 units a month.

“The sales figures have been around this level for a while. This year, domestic Scorpio sales are up 9%, at a little above 30,000,” said Pawan Goenka, president-automotive sector. As India is predominantly a diesel UV market, the company has launched the petrol version in the overseas market. While it has set up CKD facilities in Egypt and Brazil, it has started distribution of Scorpio in Chile and Peru.

“Though it’s tough to set up manufacturing operations in Russia, we are still open to it,” said Mr Goenka. M&M’s UV range at the bottom end includes soft-tops, Commander (recently renamed Major) and the Max, which retails in the taxi-segment. This followed by the Bolero, which contributes the maximum to M&M sales. The Bolero, including the Camper, sells around 4,000 units a month, followed by the Scorpio, which sells around 3,200 units a month.

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Ratio holds key to Rel Power bonus` success

Mumbai, Feb 23: Even as legal minds continue to debate the technical issues surrounding Reliance Power’s proposed bonus issue, investors are eagerly awaiting the bonus ratio expected to be announced after the board meet on Sunday.

The Reliance Power board is scheduled to meet on Sunday to consider issue of bonus shares and/or other measures aimed at reducing the cost of acquisition for minority shareholders, who have suffered losses due to the poor performance of the stock since listing.

Since the promoters will not be issued any bonus shares, their stake will automatically be diluted from the current 90%, once the board clears the proposal. Shares of R-Power closed at Rs 417 on BSE, down 1.2% on Friday.

For instance, if the market price on the record date is Rs 400 a share, then the minority shareholders’ cost of acquisition will come down by Rs 42-150 per share, depending on whether the company allow one bonus share for every five held, or one bonus share for every one held. There would have been no gains to any shareholders if the promoters would also have subscribed to the bonus issue.

The calculation is based on the post-bonus dilution in equity capital of R-Power and a pro-rata adjustment in its share price. If the board decides to issue one bonus share for every five shares held by the non-promoters on the record-date, then dilution works out to 2% and there would be a similar decline in the stock price. In comparison, the investor’s acquisition cost will fall by 20%.

In case of a 1:1 bonus, the dilution works to be 10% and the R-Power market price is expected to be adjusted by the similar price while the investor’s acquisition cost will come down by half.

If price falls below Rs 400, the gains will heavily depend on the bonus ratio. For example, if the price on the record date falls to Rs 300 per share, the investors stand to profit only if the company decides to issue at least one share for every two shares held. In the worst case scenario, if the share prices of R-Power plunge to Rs 250 by the record date, then the investors will not make money even if the bonus ratio is a liberal 1:1.

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Future ventures files DRHP for IPO

New Delhi, Feb 22: Kishore Biyani-promoted Future Group Company, Future Ventures, on Friday filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) seeking permission for a public issue.

The company plans to issue around 373.62 crore equity shares of Rs 10 each through a 100 percent book building process, Future Ventures said in a statement.

The public issue comprises a net issue to the public of 2,660,750,000 equity shares. There is a reservation of up to 50,000,000 equity shares for eligible employees and a reservation of up to 250,000,000 equity shares for eligible shareholders of Pantaloon Retail (India) limited, it added.

The net issue would constitute 66.52 percent of the post issue paid up capital of the company, it added.

The book running lead managers for the issue are JM Financial Consultants Private Limited, Enam Securities Private Limited, Kotak Mahindra Capital Company Limited, ICICI Securities Limited and Edelweiss Capital Limited.

The co-book running lead managers are Centrum Capital Limited, Collins Stewart Inga Private Limited and India Infoline Limited, it added.

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HDFC Bank to consider merger with CBoP

Mumbai, Feb 23: The HDFC Bank announced that its board of directors will meet on Saturday to consider a possible merger with the Centurion Bank of Punjab (CBoP).

This has been said in an official communique issued to the Bombay Stock Exchange (BSE) Friday evening by the HDFC Bank.

According to banking circles, the merger talks between the two entities have been doing the market buzz for the past six months. Unofficial estimates peg the value of CBoP's assets in the range of Rs.1,200 billion ($30 billion).

Once merged, the proposed new entity will rank below the ICICI Bank but above the Axis Bank, formerly known as the UTI Bank.

The merger is likely to be worked out on the share-swap deal on CBoP's current price of Rs.57 per share. HDFC Bank's share price closed yesterday at Rs.1474.95, down by 4.40 per cent.

Frantic activity has been witnessed following a marathon meeting last Wednesday between HDFC Bank's Aditya Puri and CBoP chairman Rana Talwar along with chief executive Shailendra Bhandari.

The meeting gave rise to hectic media speculation, which boosted the CBoP's price by seven percent early Friday morning, but declined later during the intra-day fluctuations.

Bureau Report

HDFC bank`s board meet begins to consider merger with CBoP

Mumbai, Feb 23: The board of private sector lender HDFC bank on Saturday began its meeting to discuss the merger possibility with Centurion Bank of Punjab.

The board is expected to appoint auditors and accountants at today`s meeting to assist it in the transaction.

HDFC chairman Deepak Parekh, while entering the bank`s premises in central Mumbai to attend the meeting, told mediapersons that if the bank`s board approved the merger proposal, then another meet would be called on Monday.

The HDFC Bank announced that its board of directors will meet on Saturday to consider a possible merger with the Centurion Bank of Punjab (CBoP).

This has been said in an official communique issued to the Bombay Stock Exchange (BSE) Friday evening by the HDFC Bank.

According to banking circles, the merger talks between the two entities have been doing the market buzz for the past six months. Unofficial estimates peg the value of CBoP`s assets in the range of Rs.1,200 billion ($30 billion).

Once merged, the proposed new entity will rank below the ICICI Bank but above the Axis Bank, formerly known as the UTI Bank.

The merger is likely to be worked out on the share-swap deal on CBoP`s current price of Rs.57 per share. HDFC Bank`s share price closed yesterday at Rs.1474.95, down by 4.40 per cent.

Frantic activity has been witnessed following a marathon meeting last Wednesday between HDFC Bank`s Aditya Puri and CBoP chairman Rana Talwar along with chief executive Shailendra Bhandari.

The meeting gave rise to hectic media speculation, which boosted the CBoP`s price by seven percent early Friday morning, but declined later during the intra-day fluctuations.

Bureau Report