New Delhi, November 9
Oil marketing companies continue to bleed as Indian Oil Corporation (IOC) today posted its largest-ever loss of Rs 7,486 crore for the second quarter ended September 30 on account of unmet under-recoveries and increase in interest costs.

IOC’s huge loss surprisingly has come on the back of a robust increase in turnover which rose by 25.5 per cent to Rs 93,868 crore from Rs 74,766 crore during the same period last year. It also stood in contrast to a profit of Rs 5,294 crore for the same quarter of the previous year.

IOC has posted a loss of Rs 11,204 crore for the first half of 2011-12 as compared to a profit of Rs 1,906 crore for the same period of the previous year. The other two OMCs, BPCL and HPCL, have posted combined losses of more than Rs 12,000 crore for the first half.

The huge loss was on account of the unmet under-recovery or the amount which has not been compensated by the government on account of non-realisation of market-related prices for diesel, kerosene and LPG for the quarter.

The under-recoveries for all three oil companies for the first half of 2011-12 is Rs 64,900 crore. Despite a cash support of Rs 15,000 crore by the government and a contribution of Rs 21,633 crore by the upstream oil companies, the OMCs have declared huge losses for the first half of 2011-12.

RS Butola, chairman, IndianOil said never before has the company witnessed such losses and this has happened in an unusual year when there has been price upheaval and rupee depreciation.

The borrowings of the OMCs have also been going up creating a tight situation to sustain them. IOC's borrowings increased from Rs 52,734 crore as of March 31, 2011, to Rs 73,296 crore as of September 30. IOC is seeking to raise its borrowing limit from Rs 80,000 crore to Rs 1.10 lakh crore but there are concerns that a weakened balance sheet and high interest costs may make the proposition very difficult. IOC expressed concern that if losses continue to mount it may have to cut down on its capital expenditure and expansion plans.

The OMCs are at unprecedented level of borrowings of Rs 1.29 lakh crore for working capital and dollar requirements for payment of funds for import of crude.

While petrol has been deregulated, prices of diesel, LPG and kerosene are controlled by the government and they make up for three-fourths of the petroleum demand in the country. These are the products where the OMC losses are coming from as their prices are not being revised while petrol is seeing regular hikes.

International broking house, UBS says deregulation of the oil sector looks unlikely given India’s tight fiscal situation and high inflation. It expects the government to continue to regulate fuel price subsidies against a background of high crude prices and a depreciating rupee.

New Delhi, November 9
Global ratings firm Moody's today downgraded the outlook of the Indian banking system to "negative" from "stable" amid an economic slowdown, which is affecting asset quality, capitalisation and profitability.

"With asset quality, given the tightening environment, we anticipate that it will deteriorate over the next 12-18 months, thereby causing an increase in provisioning needs for the banks in FY2012 and FY2013," Moody's VP and senior analyst Vineet Gupta said.

A "negative" outlook is one that is characterised by volatility and uncertain conditions, according to Moody's.

On the positive side, however, the rating firm has recognised that India banks' stable customer deposit base and their high level of government securities holdings provides them with a "resilient funding and liquidity profile" that buffers them against destabilising shocks.

India's economic growth has averaged 8.4 per cent over the past five years. But amid high inflation, monetary tightening and rapidly rising interest rates, the sustenance of the growth momentum is under pressure.

Stating that India's economic momentum is slowing, Gupta said, "At the same time, concerns have emerged over the sustainability of the recovery in the US and Europe and the rise in the borrowing programme of the Indian government, which could drain funds away from the private credit market." Loan growth would be a "strain" on the Indian banking system in the next 12-18 months, while profitability will come under pressure due to lower interest margins and an increase in saving deposit rates, the report said. — PTI 

New Delhi: Brushing aside the downgrade of Indian banks by Moody's, the government today said the rating has no significance as domestic lenders are much stronger than their global peers.

"We are not concerned. We are not affected by the downgrade. Looking at how the global banks are faring, we are much stronger and the ratings have no significance," Financial Services Secretary D K Mittal said.

He was reacting to rating agency Moody's lowering the outlook of the Indian banking system to "negative" from "stable". A "negative" outlook is characterised by volatility and uncertain conditions. Moody's said that slow growth, both in domestic and foreign economies, is putting stress on banks' asset quality, capitalisation and profitability. — PTI

New York, November 9
A US judge has ordered disgraced billionaire Raj Rajaratnam to pay a whopping $92 million as penalty in the biggest insider trading case in the US, saying the "huge and brazen nature" of his fraud "cries out" for such an unprecedented fine.

Judge Jed Rakoff of the US District Court for the Southern District of New York entered his final judgement yesterday finding Rajaratnam liable for a civil monetary penalty of $92,805,705, the largest penalty ever assessed against an individual in an insider trading case of Securities and Exchange Commission.

In the criminal case against Rajaratnam, the Sri Lankan hedge fund founder was ordered to pay more than $53.8 million in forfeiture of illicit gains and $10 million in criminal fines.

The total amount of monetary sanctions imposed on Rajaratnam in the civil and criminal cases now stands at more than $156.6 million.

In imposing the fine, Rakoff said such a severe civil penalty will bring home the message that insider trading should be "a money-losing proposition" for anyone who plans to engage in it.

He said the penalty is further justified given Rajaratnam's networth which "considerably exceeds" the penalties in the criminal case. — PTI

New Delhi, November 9
The reverberating effect of the crippling strike at the country’s largest car maker Maruti Suzuki India Ltd (MSIL) coupled with the rising interest rates and increasing fuel costs has led to the Indian car market facing its lowest sales in over a decade in the month of October.

Figures released by industry body Society of Indian Automobile Manufacturers (SIAM) here today said car sales in the country fell 23.8 per cent in October, the biggest monthly percentage decline since December 2000.

SIAM said high interest rates, vehicle costs coupled with rising fuel costs not only drove down sales for a fourth consecutive month but led to biggest monthly fall in over a decade.

The decline in sales is even lower than the fall registered even in the months of recession which hit the industry over two years ago.

Incidentally, the sharp fall has been recorded in the month where the car manufacturers in the country had hoped for a revival due to the string of festivals.

The problem has been compounded by the crippling strike at MSIL’s Manesar plant last month which led to the Indian subsidiary of Japan’s Suzuki Motor Corp (SMC) declaring that its sales had fallen by over 50 per cent in October on a year-on-year basis.

Maruti posted a 60 per cent fall in profit for the quarter ending September, almost double the estimates.

Car manufacturing companies sold 138,521 cars last month, according to SIAM, with petrol car sales hit the hardest. The number was 23.8 per cent lower than the figure of 181,704 units sold in October 2010.

Sales fell 1.8 per cent in September, 10.1 per cent in August and 15.8 per cent in July, the first slide in three years.

Motorcycle sales in the country grew marginally to 8,79,883 units during the month from 8,74,146 units in the corresponding month 
last year.

Mumbai, November 9
State Bank of India (SBI) today reported a moderate 12.4 per cent growth in net profit in the September quarter at Rs 2,810.43 crore, even as concerns over rising bad loans pulled down its share price by about 7 per cent.

However, on a consolidated basis, SBI reported a 48.60 per cent jump in net profit to Rs 3,470.43 crore for the July- September quarter.

The bank's gross non-performing assets (NPA) increased to 4.19 per cent of total assets as on September end, from 3.38 per cent a year ago. "We see pressure on asset quality and provided adequately for it. Looking at the stress, there is a possibility of the gross NPA to go up", SBI Chairman and Managing Director Pratip Chaudhuri told reporters here.

SBI has not done as well as its private sector peer ICICI Bank whose net profit went up by 22 per cent during the quarter.

Shares of SBI lost over 7 per cent following announcement of the result during the intra-day trade. The scrip, later recovered some ground to close at Rs 1,862.50, down 6.76 per cent on the BSE.

Besides other factors, lowering of outlook for Indian banks by rating agency Moody's too appears to be having an impact on the share price of the largest bank in the country. — PTI 

Rome, November 9
Silvio Berlusconi dominated Italy for 17 years with a unique mix of political talent and brazen behaviour but in the end it was market pressure from abroad that brought him down.

Berlusconi confirmed on Tuesday that he would stand down after a new budget law is approved in parliament.

"After the approval of this finance law...I will resign, to allow the head of state to open consultations," he told his own Canale 5 television.

Bolstered by unrivalled communication skills and a dominance of Italian media, Berlusconi had for years seemed immune to a series of controversies that would have destroyed a politician in most other parts of the world.

They included the lurid "Rubygate" scandal in which he was charged with having sex with an under-age prostitute, and included a wave of salacious revelations from police wiretaps about alleged orgies at his luxurious Milan villa.

He also faces two ongoing fraud court cases, the latest in more than 30 prosecutions by magistrates he accuses of being communists bent on perverting democracy.

The perma-tanned media tycoon, once a cruise ship crooner, was always unrepentant about a notoriously off-colour sense of humour and a series of diplomatic gaffes which have led some foreign leaders to try to avoid being photographed near him. — Reuters

New Delhi, November 9
Tightening the norms, the government has done away with automatic approval of foreign direct investment (FDI) in the existing pharmaceutical companies.
For any merger or acquisition, the overseas investor will have to seek permission from Foreign Investment Promotion Board (FIPB).

After six months, it will be the monopoly watchdog Competition Commission of India (CCI) which will vet such deals.

The decision follows directions from Prime Minister Manmohan Singh who, along with his senior Cabinet colleagues, had deliberated on October 10 over concerns arising out of several acquisitions of domestic pharmaceutical companies by overseas firms. — PTI