Consolidation of Companies

Benefits derived from Consolidation of Group Companies

Coming very close to the merger of Sterlite Industries and Sesa Goa, Aditya Birla group has also announced its plans for consolidation of group companies under a common centralised managerial team while keeping the group companies different entities. What are the reasons that companies have started the process of consolidation of businesses? Are we looking at a trend that shall pick up in times to come? 

Major benefits of consolidation of companies

Tax benefits

1. A host of tax benefits accrue to companies going in for consolidation. Tax credits from one company can be utilised for other group company.
2. Set-off of losses from inter-group companies.

Operational Benefits

1. Synergy of plans and operations among group companies.
2. Efficiency in decision-making and faster implementation.
3. Manpower and other resources sharing.
4. Higher value creation and market capitalisation
5. Allowing greater leverage of companies' equity base.

A host of companies in India are expected to follow the example of Sterlite -Sesa and Aditya Birla Group to bring in greater functional and operational synergies.

Which is the lesser of the two Devils - Inflation or Slowdown?

Reserve Bank of India considers Inflation a more cause of concern than slow rate of growth.

Contributed by - Arihant Bhandawat

Inspite of recent noises made by Finance Minister, P. Chidambaram, to prop up the markets, ease liquidity worries and enlist plans of government to reduce deficit financing, RBI has kept liquidity and interest rates on a tight leash. 

Considering inflation as a bigger worry, RBI has kept safe distance from any big-bang rate cut announcements which the market had been expecting following the FinMin's recent announcement to phase out deficit financing to manageable limits by 2017. Clearly, by keeping interest rates unchanged RBI has made everyone know about its priority.

It shall be interesting to see how this battle between Inflation and Slowing economy plays out in the near future.

Watch this space for more action.

Cash Reserve Ratio (CRR) - dymystified

Cash Reserve Ratio (CRR)

Contributed by - Arihant Bhandawat

What is Cash Reserve Ratio (CRR)?

It is the percentage of total deposits (both time and demand deposits) that commercial banks need to keep with the Central Bank of any country.  In India the CRR rate as on 30.10.2012 was 4.5% (w.e.f 22.09.2012). These rates are subject to regular changes as per Reserve Bank of India's notifications.

What is the purpose of Cash Reserve Ratio (CRR)?

Cash Reserve Ratio (CRR) began with the purpose for providing following policy support:

1. Providing safety net to both time and demand deposit holders' money kept with commercial banks.
2. Source of liquidity and fund transfers in the financial sector of any country.
3. Providing platform that aids in inter-bank transactions.
4. Providing financial stability to the financial sector.
5. CRR is also used as an important policy tool to control inflation, interest rates and availability of credit facilities and money supply in the economy. It, therefore, provides Reserve Bank of India (or any other Central Bank) an important Monetary Policy tool to boost investments and business sentiments in the country.

Government becomes farmer - What is this talk of Re-farming by government?!?

Re-farming of air-waves planned by government

The government is putting in place regulatory guidelines to take back spectrum airwaves in the 900 MHz category from existing telecom giants like Bharti Airtel, Idea Cellular, Vodafone, etc. The idea of re-farming of airwaves is derived from the government's plan to ask all existing operators to pool back all spectrum post-2014 when they have to renew their existing licenses. If the government carries it forward, these companies shall have to surrender all their existing spectrum and consequently have to bid for them all over again. 

Refarming of telecom spectrum

While the  re-farming of the spectrum may benefit the newcomers in the Indian telecom space and create a level-playing field and raise lot of precious cash for the deficit-laden government but it is definitely not good news for the existing operators. They might have to pump in huge cash to either buy the existing spectrum in a bidding war or move to equally costly shift from the 900 MHz band to 1800 MHz.

The government is becoming a new age farmer, let's hope it has a healthy harvest without crippling the consumers!!

Beware of those "andar ki khabar" - Fallout of Insider Trading

Insider Trading explained in Indian context

While the world might be glued to the sentencing of the former Goldman Sachs director Rajat Gupta, the Indian Securities market watchdog SEBI is gearing up its systems to tackle that has been the bane (or boon depending on which side you belong to) for traders. SEBI has had a limited impact to tackle the menace of Insider Trading in India.

Insider Trading in India

New Colour of Big Money in Entertainment - IPL, Bollywood and Bigg Boss

New Money in Indian Economy

The Indian big money pie has seen a great rise in the recent times. The most notable among them being IPL, Bollywood and Reality TV where the biggest of them all is the Bigg Boss. Much action has taken place in all these segments in the past few days. Let's have a round-up:

IPL - Sun has set on the Deccan Chargers

As the Sun TV network buys out the Hyderabad team replacing the debt-loaded Deccan Chronicle Holdings Limited for 85.05 crores in fresh bids called by BCCI. This amount represents almost twice the amount paid by the last owners of the Hyderabad-based team which was brought by Deccan Chronicle Holdings Limited. A break-up of the tale that broke out on the Deccan Chargers has been provided below:

1. The Deccan Chargers team was terminated from IPL after it fails to provide requisite gurantee to BCCI
2. Legal wrangling follows the termination. However, BCCI sees its own wishes through in Courts as the Courts rule in favour of termination.
3. BCCI calls for fresh bids.
4. BCCI is richer by double the amount it would have earned from Deccan Chronicle Holdings Limited.

King of Good Lesson - Kingfisher Airlines

Good Lessons learned from King of Good Times

The King of Good Times that made traveling in red coloured aircraft fashionable is now causing the employees and investors see red! The key lessons that the glam-boy of Indian industry has provided is a classic text book case study for any student of management. Let us look into the lessons learnt from the Kingfisher saga.

KINGFISHER AIRLINES FINANCIAL PROBLEMS

Indian Financial Zone

Indian Financial Zone

Financial information at your fingertips. What to do with your money? What's happening in the financial space in India and abroad? We shall look into all these factors and much more in this blog.

Share and learn more on Indian financial space.

Arihant Bhandawat