Tata Capital opens doors to retail investors

Tata Capital is a non-banking finance company (NBFC), which provides small and
Medium enterprises (SME) loans, retail loans and infrastructure loans. Through its
subsidiaries, the company is also present in fee-based businesses like brokerage, investment banking and portfolio management; however most of its asset book comprises of fund-based assets.
Recently, the company came out with an issue of non-convertible debentures (NCD) offering the yield of 11.57%-12% per annum (p.a.). The issue closes on February 24,’09. Considering the rates on the fixed rate instruments, the issue appears to be attractive. A couple of months back even banks were offering fixed deposit rates (FD) of 11% p.a.
However, the Reserve Bank of India (RBI) has cut the key rates dramatically leading to a low interest rate regime. Therefore, the banks have cut the FD rates. Going ahead, it seems unlikely that the banks will offer interest rates exceeding 10% p.a.
This makes Tata Capital’s issue of NCD even more attractive as the investor is assured of 12% p.a. at least for the first three years of the bond’s tenure. After 36 months, there is a put/call option, which means that the company and the investor have the option to redeem the bond. Moreover, NCD is a secured instrument, which adds to its creditworthiness unlike FD, which is not a secured instrument
The issue is coming at a time, when the economy is slowing down. As a result, most of the banks and NBFCs have gone slow on disbursements in order to take stock of the asset quality. Gone are the days, when NBFCs were expanding at high rates of 50% p.a. The outlook is challenging for companies in financing business. Tata Capital has said that it will be focussing on the companies within the Tata ecosystem. The company is prohibited from lending to the companies of the Tata Group.
However, it can lend to the suppliers and vendors of Tata Group companies. This is where it stands a great advantage, as sector expertise is crucial while deciding upon the borrower. And, it takes years for financing companies to build expertise and to this extent Tata Capital does have a head start. The company also has presence in big-ticket personal loans, where the repayment risk is much lower than low size loans. The slowdown has been severe to the markets which the company is targeting namely SME, personal and infrastructure loans. However, the slowdown fears are more relevant to bigger players, which have already tapped the market. As far as Tata Capital is concerned, its asset book stood at Rs 8,000 crore approximately on Sep 30,’08.
The company plans to raise maximum of Rs 1,500 crore with the current NCD issue.
Moreover, it has adequate capital to deal with any eventuality. Its capital adequacy ratio stands at 26.1% much higher than the 10% prescribed by RBI.
A strong capital base indicates that company has been efficiently managing the liquidity risk and it intends to scale up the operations. All these factors combine minimize the repayment risk on this NCD issue from an investor’s perspective. Moreover, ICRA and CARE, the credit rating agencies, have assigned LAA+ and AA+ rating to the issue, thereby affirming the company’s creditworthiness. It seems that the company wants to build a relationship with retail investors. This is evident as the minimum an investor can invest is Rs10,000. In a nutshell, it seems worthwhile for investors to subscribe to Tata Capital’s NCD considering that it is a secured fixed rate instrument, the yield is higher than other instruments, there is a lock-in of three years and the company has strong brand name. Basic understanding of its borrowers in SME space is an added advantage

Source:Economicstimes

Time to lock your money in bank FDs

Investors looking at high returns on deposits should soon lock their money with banks since interest rates on retail
deposits may have peaked.
Bankers say the cut in repo rates on Monday indicates that this is the beginning of a soft interest rate regime. Further, they said they would first lower their fixed deposit rates and then reduce lending rates. This indicates that banks may come under pressure to reduce deposits rates.

Currently, most banks are paying a maximum rate of 10.5% for one to less than three years while senior citizens are entitled for 11%. Interestingly, the 10.5% offered on deposits for three years was last offered in 1999-00, following which the interest rate cycle began to turn southwards. Rates had fallen sharply to 5.25-5.50% in 2003-04.

The country’s largest housing finance company, HDFC, offers as high as 10.90% for 30 months if an individual deposits Rs 1 lakh and above. While for deposits below Rs 1 lakh, HDFC offers 10.55%. Among others, ING Vysya Bank is offering 11% for 365 days and 10% for 99 days.

ICICI Bank, which offers 10.5% for 390 days, 590 days and 890 days while rates for other tenures are lower. Although 10.5% for 390 looks attractive, ideally, a depositor should
invest in long-term deposits like 890 days. This will help them avoid a negative impact of lower interest rates.

This means that if a depositor parks his money in long-term deposits, even if the interest rate cycle turns, the depositor would gain. The highest rate on longest tenure is 10.5% offered by India’s largest bank, SBI, which is for 1,000 days. Similarly, Indian Overseas Bank offers 10.5% for 720 days and Canara Bank offers 10.5% for 500 to two years.

However, while parking money with banks, particularly for long term, depositors should carefully see the clause regarding the pre-payment of penalty. Penalty varies from banks to banks. SBI and Indian Overseas Bank charge 1% penalty if deposits are broken during the tenure.

Source: Economictimes

IDBI Bank revises interest rates on fixed deposits

IDBI bank reduced the interest rate on retail term deposit by 50-150 bps in the maturity bucket of 46-90 days upto 10 years wef January 1, 2009 and also realigned its maturity buckets.

Further, the Bank is introducing a longer maturity term deposit of 1100 days with interest rate for normal depositors @9.5% pa and @10% pa for senior citizens in lieu of the existing 890 days term deposit. This new Deposit is available from January 1, 2009.

Source: Economictimes

UTI Mutual Fund gets ‘Star Fund House of the Year’ award

UTI Mutual Fund has been awarded the ‘Star Fund House of the Year’ by ICRA Mutual Fund awards 2009 in the equity category for one year period ending December 31, 2008.

UTI Mutual Fund was also awarded nine ICRA Mutual Fund Awards 2009 under its various schemes.

On the occasion, U K Sinha, Chairman and Managing Director, UTI Asset Management Company Ltd., said, “This is a result of the structural and process changes that we had initiated around 2 years back. The efforts of UTI fund management team has culminated in UTI Mutual Fund winning the Star Fund House of the Year award in the Equity Category. UTI Mutual Fund is a process oriented fund house which strives to give its investors the best possible returns. Recently UTI Mutual Fund has also won the Outlook Money NDTV Awards 2008 for the Best Debt Fund House for the year ended June 30, 2008.”

ICRA Mutual Fund Awards, based on the proprietary ranking methodology, is devised jointly by ICRA and ICRA Online Ltd. The ranking process considers only growth oriented open ended equity and debt schemes apart from liquid schemes where institutional plans are also considered.

For more information visit to: http://deal4investments.blogspot.com/

Source:financialexpress