New Delhi, August 10
India's economic growth could fall below 5 per cent in the the first quarter of current fiscal, impacted by contraction in industrial output and deficient monsoons, global research firm Citi has said.

"The (industrial) production numbers will have a bearing on the 'value-add' industry numbers for Q1FY13 GDP. This coupled with sub-par monsoons and the deceleration seen in some of the service sectors could result in a sub 5 per cent Q1 FY13 GDP," Citi said in its India Macro Flash report.

Data released Thursday said industrial output in the first (April-June) quarter contracted by 0.1%, against a healthy 6.9% growth in the corresponding period last fiscal. For the month of June, IIP declined by 1.8%, against a growth of 9.5% a year ago.

Besides, rain has been 20 per cent lower during June-July, affecting kharif crops, mainly coarse cereals and pulses. Karnataka, Gujarat, Maharashtra and Rajasthan are facing drought-like situation.

Last week, the Met department said the monsoons will be below normal by 9-10% of the long period average. Monsoon is the life-line of the agriculture sector as only 40% of the cultivable area is irrigated.

The Reserve Bank in its policy review last month had kept key interest rates unchanged but cut its growth expectations for the fiscal to 6.5% from the earlier 7%, blaming high fiscal deficit, sticky inflation and a possible drought.

"On rates, while we lowered our rate cut call to 50 basis points, given the RBI's stance on inflation, we re-iterate that rate actions are contingent on 'some' government action," Citi said. — Agencies

Mumbai, August 10
State Bank of India, the country's largest lender, posted a second-straight surge in quarterly net profit on strong loans growth, beating street expectations, but a rise in bad loans pulled its shares down.

The bank’s exposure to embattled Kingfisher Airlines and Air India is also causing some nervousness to investors.

The results show that government-owned SBI's efforts to clean up its books since last year are yet to pay off and it is yet to bridge the gap between the quality of its earnings and those of private sector lenders such as ICICI Bank and HDFC Bank.

Government-owned lenders account for 70 percent of the market in India but their lending decisions are not always driven by commercial considerations. State-run banks last month reported a spike in bad loans for the June quarter, while the private lenders showed stable asset quality.

SBI's net profit more than doubled to Rs 37.52 billion from Rs 15.84 billion a year earlier. Analysts, on average, had expected a net profit of Rs 36.17 billion.

Its nonperforming loans rose to nearly 5% at end-June from 3.5% a year earlier but provisions, or the funds set aside for bad loans and contingencies, were down 41% to Rs 25.6 billion.

SBI shares were down 4.5% on Friday afternoon, in a Mumbai market that was down 0.4%.

Standard Chartered said in a post-earnings note SBI's new bad loans at end-June were at a record Rs 108.4 billion compared to the Rs 55 billion guidance given by the management. — Reuters

Chandigarh, August 10
The Haryana treasuries & accounts department has expressed its displeasure with various banks for failing to streamline the electronic payment system following automation of state government treasuries and linking up treasuries.

Raising the issue at the state-level bankers committee meeting here on Thursday, the government accused banks of not deploying sufficient manpower for smooth functioning of its treasuries, being ignorant about instructions relating to government business and erroneous reporting of government business to the RBI.

Taking up the matter with the committee, treasuries & accounts department director Harinder Kumar said the directorate of treasuries performs its activities through 21 district treasuries and 85 sub treasuries, and over 6,600 drawing and disbursing officers of various state government departments interact with these treasuries for withdrawal (expenditure) and deposit (receipts) of funds from/ in the consolidated fund of the state. He said though Haryana was among the first states to go in for automation of government treasuries and had all systems in place for electronic payments of salaries, pensions and other government expenditure, banks had failed to keep pace.

Kumar said the banks have not employed sufficient manpower, nor is is it trained for carrying on government business. “Banks are demanding charges for payment through RTGS/ NEFT or demand opening of account in their branch for purpose of each transaction, which is not required. Some banks are still not on core banking, making electronic funds transfer difficult for the state government treasury. Others are not capable of accepting digital data of payee cheques and demand soft copies for purpose of RTGS/ NEFT/ ECS. In case of overpayment by banks (in cases of pension disbursal), the excess payment is not immediately credited to the government account and cases are dragged for long time despite RBI instructions to make such loss good immediately,” he told the panel.

Kumar added his department had forwarded a list of 105 branches of 10 banks that were facing difficulty in implementing the electronic payment system. Following this, the committee has now decided to form a separate subcommittee to look into the problems faced by the Haryana treasury and is likely to hold its first meeting later this month to iron out all issues.

Mumbai, August 10
The $100-billion Tata Group chairman Ratan Tata today sought the support of group's shareholders to his successor Cyrus P Mistry, who will take over the mantle of the salt-to-software giant in December.

"Cyrus Mistry has all the qualities and values to take the Tata Group in the direction that it has continued in all these years," Tata told the annual general meeting of its flagship company Tata Motors here on Friday.

Seeking the support and encouragement of the shareholders for Mistry, Tata said, "I want you to extend the same sort of support and encouragement that you have given to me all these years, to Mistry as well."

Thanking the Tata Motors' shareholders, as this is his last AGM of the company as the chairman, Tata said: "Let me express my deep appreciation and thanks to all employees and shareholders. Without you, the company wouldn't have achieved this success."

Tata said Tata Motors, which is the largest auto company in the country, apart from being the fourth largest commercial vehicle-maker in the world, will have to single-mindedly retain and protect its market position across all segments.

"Failure to do so will see us slipping," he warned and said, "I hope the employees will rise to the occasion in spirit to meet the needs of the changing times."

On his prized buy Jaguar Land Rover, which helped the company post an over 12% rise in the net income in the June quarter, despite a 49% plunge in the net profit of the domestic business of Tata Motors, Tata said, the company is introducing very competitive range of commercial vehicles, which can compete admirably with international CV makers like Merc, Volvo, Navistar. — PTI

New Delhi, August 10
The 2G spectrum auction base price as set by the government last week has not only come in for criticism from the private telecom operators but has had experts pointing out that the auction would have a major impact on the future of the telecom sector, with major outflow of finances from the service providers and possible mergers and acquisitions.

While international rating agency Fitch has said the new spectrum pricing will drive consolidation in the telecom sector and lead to higher industry tariffs, besides forcing some of the existing telecom operators to shut shop, another rating agency ICRA has said in the longer term high spectrum price would weigh heavily on the telecom sector.

The auction determined prices would form the basis for price to be paid by the operators for spectrum in future - for renewal of spectrum or the one-time spectrum charge (if levied). Keeping this in mind, the operators would need to prepare their strategy for the next wave of growth for the industry, which is expected to be the data space, although it is likely to take some time to evolve, ICRA said.

Fitch continues to have a “negative outlook” on the sector, due to ongoing regulatory uncertainty and has said that it expects most of the telecom companies whose licences were cancelled by the Supreme Court not to participate in the forthcoming spectrum auction.

The cabinet last week approved a auction base price of Rs 14,000 crore for the air waves in the 1800MHz band and Rs 18,200 crore in the 800 MHZ band.

Fitch said the base price in the 2G bandwidth (1800Mhz), which is used essentially for voice and text, was one of the most expensive in the Asia-Pacific region. The 2G spectrum is offered at a nominal price, or with no upfront fees on a "first-come first-served" basis by Indonesia, the Philippines, Thailand and South Korea.

“We believe India's telecom sector can afford six profit-making operators at the very most. High spectrum pricing will hasten industry consolidation and will most likely result in higher tariffs which could be initiated by the largest operators. We expect many of the telcos whose licences were cancelled by India's Supreme Court in February 2012 won’t participate in the reauction, as most of the firms have a stretched balance sheet," Fitch said, while adding the three smaller operators — Etisalat, Videocon and STel — had already exited the industry.

The Indian subsidiaries of Telenor and Sistema are most likely to pull out either completely or in part. The fifth- and sixth-largest private operators (subsidiaries of Tata and Maxis) may also look to consolidate to strengthen their position, as both operators have been unable to register an operating profit so far, Fitch said.

New Delhi, August 10
Shriram group firm Usha International said Friday it had exited from its joint venture with Honda Motor Co by selling its entire 3.16% stake to the Japanese partner for Rs 180 crore.

"Usha, Honda Siel Cars India Ltd and Honda Motor Co, Japan, after working together for 16 years to develop Honda Siel Cars India Ltd (HSCI) have agreed to end their JV," the domestic partner said. Following this decision, Honda Motor Co has "purchased all of the shares that Usha held in HSCI", it added.

The Indian entity further said the stake sale has been negotiated at a price of Rs 100 per share, inclusive of a noncompete fee. "According to the agreement with Honda Motor, Siddharth Shriram has ceased to be a director and the chairman at HSCI," Usha said.

In a separate statement, HSCI said the two JV partners have signed an agreement on complete divestment by Usha International Ltd (UIL).

"UIL, which held 3.16% shares in HSCI, had shown an interest in divesting from the JV. Following this, HSCI will now be a 100% Honda subsidiary in India. The process of changing the company name and other formalities will be completed over the next few months," the carmaker said.