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BUSINESS REVIEW Reliance says KG D6 costs were not overstated

Energy major Reliance Industries said on Friday there was no evidence to suggest that costs in development of the country's key natural gas field in the Krishna Godavari (KG) basin were overstated. The Comptroller and Auditor General (CAG) has criticised Reliance and the government over development of KG-D6 basin and called for revamping profit sharing arrangements from oil and gas blocks. The offshore KG basin was expected to contribute up to one-quarter the gas supply for India, but lower-than-expected output has left the energy-hungry nation more dependent on expensive, imported LNG to fuel power and fertiliser plants. Global consulting firm Ernst & Young found no evidence suggesting KG D6 costs were overstated in purchases from third parties or from related parties, Reliance said on Friday, a day after the auditor submitted the report to parliament. The KG D6 project was completed in a timely manner despite hostile weather conditions and significant supply chain constraints, Reliance said. "The KG D6 project faced considerable physical and execution environment challenges as well as difficulties faced in the E&P capital projects market," it said, citing findings of IPA Inc, an independent project evaluation consultant. The auditor's report had said Reliance, the operator of the KG-DWN-98/3 block, was allowed to violate terms of its production sharing contract. The auditor does not have prosecuting power, but its findings can form the basis of any possible government action against Reliance, as well as future policy on exploration.

Sebi plans guidelines to regulate investment advisory space

In the backdrop of alleged frauds involving investment products committed by staff of some foreign banks, Sebi Chairman U K Sinha today said the capital markets watchdog would soon come out with guidelines to regulate such activities. "There are distributors and there are advisros. One is masquerading as the other and the conflict of interest situation is not getting resolved," Sinha said while addressing the convocation function of the National Institute of Securities Markets here. A draft of the discussion paper will be put in public domain soon, he added. "The idea is that the investor should know if he is going to a particular advisor, that person is only working as an advisor. He has no vested interest in selling a particular product," Sinha said. Over the past year, there has been a spurt in allegations of mis-selling of investment products by wealth advisors, especially following the discovery of alleged frauds committed by wealth advisors or relationship managers of a couple of foreign banks. After the frauds, a need was felt to restrict such instances. As the activities of such advisors span the jurisdiction of multiple regulators like Sebi, insurance watchdog Irda and the banking regulator RBI, there was also talk of having a separate regulator for the space. Pension funds regulator PFRDA's Chairman Yogesh Agarwal had also recently mooted the idea of having a "lead regulator" to watch the space. Meanwhile, Prime Minister's Economic Advisory Council Chairman C Rangarajan, who was also present at the event, said the Government will achieve its target of raising Rs 40,000 crore through the disinvestment process this fiscal. On fiscal deficit, he said greater focus will be needed to keep it at the targeted 4.3% of the GDP this fiscal. The Government needs to be careful on the expenditure front, particularly on the subsidies, Rangarajan said. He said if the global crude prices continue to remain high, we should increase the domestic fuel prices.

UltraTech Cement eyes 10% share from Middle East market

Aditya Birla Group's cement arm, UltraTech Cement , is eyeing 10% share from the Middle East market where it has recently forayed through the acquisition of ETA Star of Dubai.

"With the acquisition of ETA Star, we aim to achieve around 10% market share there," UltraTech Chairman Kumar Mangalam Birla told shareholders at the company's 11th annual general meeting here today. Last year, the company acquired ETA Star Cement to enter into markets like the United Arab Emirates (UAE),Bahrain and Bangladesh. Also Read: Ultratech to spend Rs 11K cr in 3 yrs on expansion says Birla "The acquisition is in line with long-term strategy of expanding our global presence across businesses and is consistent with our vision of taking India to the world," he said. The demand for infrastructure in the Indian Ocean Region (IOR) is growing, he said, adding, "we are focused on investing outside India in this region, where we see a large growth in infrastructure going forward. The investment in ETA is in line with our plan our strategy to leverage in IOR." "We are on the look out for opportunities by way of acquisition etc for expanding our business. The merger with Samruddhi Cement has not only helped us increase our presence pan-India but also resulted in UltraTech emerging as the largest cement company in India and 9th largest in the world," Birla said. On the dip in the growth of cement industry in FY 11 Birla said, "the prices will continue to remain subdued given the fact that the demand for cement is much lesser than the supply. In FY 12, the demand is likely to be around 228 mtpa and the supply would be 292 mtpa. Therefore, there will a surplus of around 64 mtpa. However, we expect the situation to correct in the next few years." The company plans to spend around Rs 11,000 crore over the next three years to enhance productivity and cost efficiency, Birla said. UltraTech has planned clinkerisation plants through brownfield expansion in Chhattisgarh and Karnataka together with additional grinding units, installing waste-heat recovery systems and instituting bulk packaging terminals and setting up of ready-mix concrete plants. "These expansions are expected to be operational by Q1 FY14 and will augment cement capacity by 9.2 million tonne per annum (mtpa). These projects will be funded through a judicious mix of internal accruals and borrowings," he said. UltraTechs current capacity stands at 52 mtpa. "I view the cement sector as one with a high growth potential. UltraTech is exploring both organic and inorganic growth to further strengthen its leadership position," he added.

LIC Housing Finance launches teaser home loan scheme

Mortgage company LIC Housing Finance today joined the teaser home loan bandwagon by introducing 'New Advantage 5', under which the interest rate would remain fixed for the first five years. New Advantage 5 is offered at fixed interest rates for the first five years and thereafter at floating rates, LIC Housing Finance said in a statement. The floating rates will be linked to the Prime Lending Rate prevailing at the time of the switch, it said. The scheme is available till December 31, with a condition that the first disbursement should be availed by the customer on or before January 15, 2012, it added. With the launch of the new product, LIC Housing Finance becomes the third lender to offer such a scheme. Earlier this week, country's biggest mortgage firm HDFC launched such product in the market. ICICI Bank was the first to introduce a fixed home loan scheme last month, after SBI discontinued with it in April. LIC Housing Finance further said loans of up to Rs 30 lakh will have a fixed interest rate of 11.15% for a five-year period. Similarly, loans in the range of Rs 30 lakh to Rs 75 lakh will have fixed interest rates of 11.40% and Rs 75-150 lakh loans will attract 11.65% for a five-year period. Clarifying whether such products are teaser or not, the RBI said loans that are fixed in the initial years and become floating later would be considered as teaser loans, and banks must make provisions as mandated by the regulator. "Interest rates that are a mixture of these two (fixed and floating) are called teaser rates," RBI Deputy Governor KC Chakrabarty had recently said. "If there are rules, they (teaser loan products) will attract additional provisioning," he had added. He, however, clarified that such products are legitimate and the regulator has not banned such products, but only laid down rules to provide for such loans.

Interest rates to remain high: SBI

Countrys largest lender State Bank of India (SBI) has said that lending rates would continue to stay upward in the wake of spiraling inflation. "Interest rates are likely to remain high because inflation is high ... till such time, inflation is high, Reserve Bank finds it difficult to lower the interest," SBI Chairman Pratip Chaudhuri told reporters here yesterday. Describing pre-payment penalty as anti-customer step, SBI Chairman said that the bank had already waived such penalty on floating loans two months back. "We think it (pre payment penalty) is an anti-customer step. We do not want to treat our customers as hostages and charge ransom from them (to allow them to move to other bank where they get cheaper loan)," he said. The SBI Chairman exuded confidence that the bank would achieve good rate of growth in deposits and advances in current fiscal on the back of countrys expected 8% growth in GDP. "Bank should be doing well because country is growing at 8%. We think our deposits and loan growth should grow by 20% in current fiscal," he said. Amid rising lending rates regime, SBI has also decided to launch a new car loan product whereby it would charge Rs 1,700 as EMI on Rs 1 lakh loan with interest rate of 11.5% per annum. "We are coming out with an attractive product for car loan in which EMI will be Rs 1,700 per lakh. If someone taken a loan of Rs 3 lakh then he will pay close to Rs 5,000 as installment," he said, adding, "interest will also be calculated on daily balance." Asked about its Rs 20,000 crore right issue to fund its expansion plans, Chaudhuri said, "it is very much there and it should happen next month or so."