By Ketaki Gokhale - Feb 10, 2012 6:52 PM GMT+0530
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Enlarge image Reliance Communications Profit Misses Estimates on Debt Cost
Pedestrians walk past a Reliance Communications Ltd. retail store in Mumbai. Photographer: Dhiraj Singh/Bloomberg
Reliance Communications Ltd. (RCOM), India’s second-largest mobile phone operator by subscribers, reported quarterly profit that missed analyst estimates on higher debt costs.
Third-quarter net income declined 61 percent to 1.86 billion rupees ($37.6 million) in the three months ended Dec. 31, from 4.8 billion rupees a year earlier, the Mumbai-based company said in a statement today. That compares with the 2.21 billion-rupee median of 20 analysts’ estimates compiled by Bloomberg.
Billionaire Anil Ambani’s flagship company follows bigger rival Bharti Airtel Ltd. (BHARTI) in reporting earnings that fell short of expectations after phone usage slowed and costs increased. Reliance, which spent 85.9 billion rupees in 2010 at auctions to buy airwaves for third-generation services, is refinancing foreign-currency loans to extend their maturity.
“Net income is down year-on-year because of costs related to 3G spectrum and the rollout of services,” Unmesh Sharma, an analyst at Macquarie Capital Securities in Mumbai, said before the announcement. “In the near term, this is going to continue to be a pressure across the sector.”
Reliance, India’s largest mobile-phone operator after Bharti, had 150 million connections at the end of December, according to the nation’s telecommunications regulator.
Net sales fell to 48.24 billion rupees from 48.65 billion rupees a year earlier, according to the statement. That’s lower than the 52.1 billion-rupee median of 21 analysts’ estimates.
Refinancing Debt
Financial charges at the company almost tripled to 3.78 billion rupees in the third quarter, according to the statement.
Reliance said it will refinance about $1.18 billion of foreign-currency debt due March 1, according to a company press release today. China Development Bank Corp., Export-Import Bank of China and Industrial & Commercial Bank of China will help the Indian operator extend the maturity of the loans by seven years at an interest rate of about 5 percent.
Earnings before interest, taxes, depreciation and amortization, or Ebitda, fell to 16.1 billion rupees from 16.7 billion rupees a year earlier, while the Ebitda margin declined to 31.9 percent from 33.3 percent a year earlier.
Stock Performance
Reliance fell 1.2 percent to 94 rupees at close in Mumbai, before the earnings were announced. The stock has gained 34 percent this year, compared with the 15 percent jump in the benchmark Sensitive Index (SENSEX), or Sensex. Bharti has risen 1.9 percent.
Bharti this week reported third-quarter profit fell 22 percent to 10.1 billion rupees. The company’s Indian customers cut phone usage 7 percent in the quarter, after it raised call rates.
India’s highest court on Feb. 2 canceled 122 second- generation mobile-phone licenses, including all the permits used by the local units of Emirates Telecommunications Corp., or Etisalat, and Norway’s Telenor ASA. (TEL)
Etisalat and Telenor had purchased stakes in Indian companies that won the permits. The court scrapped the licenses, sold in 2008, saying they were acquired through an arbitrary and “unconstitutional exercise.”
Reliance won 3G wireless permits in 13 of India’s 22 telecommunication zones in May 2010.
Reliance plans to raise as much as $1.5 billion through a Singapore listing of its submarine cable assets, a person familiar with the matter said last month. It may sell 75 percent of the FLAG Telecom unit of Reliance Globalcom, a subsidiary of Reliance Communications, in an initial public offering, according to the person.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
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Saturday, February 11, 2012
Friday, February 10, 2012
Reliance Communications Net Misses Estimates on Debt Costs By Ketaki Gokhale - Feb 10, 2012
Reliance Communications Ltd. (RCOM), India’s second-largest mobile phone operator by subscribers, reported quarterly profit that missed analyst estimates on higher debt costs.
Third-quarter net income declined 61 percent to 1.86 billion rupees ($37.6 million) in the three months ended Dec. 31, from 4.8 billion rupees a year earlier, the Mumbai-based company said in a statement today. That compares with the 2.21 billion-rupee median of 20 analysts’ estimates compiled by Bloomberg.
Billionaire Anil Ambani’s flagship company follows bigger rival Bharti Airtel Ltd. (BHARTI) in reporting earnings that fell short of expectations after phone usage slowed and costs increased. Reliance, which spent 85.9 billion rupees in 2010 at auctions to buy airwaves for third-generation services, is refinancing foreign-currency loans to extend their maturity.
“Net income is down year-on-year because of costs related to 3G spectrum and the rollout of services,” Unmesh Sharma, an analyst at Macquarie Capital Securities in Mumbai, said before the announcement. “In the near term, this is going to continue to be a pressure across the sector.”
Reliance, India’s largest mobile-phone operator after Bharti, had 150 million connections at the end of December, according to the nation’s telecommunications regulator.
Net sales fell to 48.24 billion rupees from 48.65 billion rupees a year earlier, according to the statement. That’s lower than the 52.1 billion-rupee median of 21 analysts’ estimates.
Refinancing Debt
Financial charges at the company almost tripled to 3.78 billion rupees in the third quarter, according to the statement.
Reliance said it will refinance about $1.18 billion of foreign-currency debt due March 1, according to a company press release today. China Development Bank Corp., Export-Import Bank of China and Industrial & Commercial Bank of China will help the Indian operator extend the maturity of the loans by seven years at an interest rate of about 5 percent.
Earnings before interest, taxes, depreciation and amortization, or Ebitda, fell to 16.1 billion rupees from 16.7 billion rupees a year earlier, while the Ebitda margin declined to 31.9 percent from 33.3 percent a year earlier.
Stock Performance
Reliance fell 1.2 percent to 94 rupees at close in Mumbai, before the earnings were announced. The stock has gained 34 percent this year, compared with the 15 percent jump in the benchmark Sensitive Index (SENSEX), or Sensex. Bharti has risen 1.9 percent.
Bharti this week reported third-quarter profit fell 22 percent to 10.1 billion rupees. The company’s Indian customers cut phone usage 7 percent in the quarter, after it raised call rates.
India’s highest court on Feb. 2 canceled 122 second- generation mobile-phone licenses, including all the permits used by the local units of Emirates Telecommunications Corp., or Etisalat, and Norway’s Telenor ASA. (TEL)
Etisalat and Telenor had purchased stakes in Indian companies that won the permits. The court scrapped the licenses, sold in 2008, saying they were acquired through an arbitrary and “unconstitutional exercise.”
Reliance won 3G wireless permits in 13 of India’s 22 telecommunication zones in May 2010.
Reliance plans to raise as much as $1.5 billion through a Singapore listing of its submarine cable assets, a person familiar with the matter said last month. It may sell 75 percent of the FLAG Telecom unit of Reliance Globalcom, a subsidiary of Reliance Communications, in an initial public offering, according to the person.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Third-quarter net income declined 61 percent to 1.86 billion rupees ($37.6 million) in the three months ended Dec. 31, from 4.8 billion rupees a year earlier, the Mumbai-based company said in a statement today. That compares with the 2.21 billion-rupee median of 20 analysts’ estimates compiled by Bloomberg.
Billionaire Anil Ambani’s flagship company follows bigger rival Bharti Airtel Ltd. (BHARTI) in reporting earnings that fell short of expectations after phone usage slowed and costs increased. Reliance, which spent 85.9 billion rupees in 2010 at auctions to buy airwaves for third-generation services, is refinancing foreign-currency loans to extend their maturity.
“Net income is down year-on-year because of costs related to 3G spectrum and the rollout of services,” Unmesh Sharma, an analyst at Macquarie Capital Securities in Mumbai, said before the announcement. “In the near term, this is going to continue to be a pressure across the sector.”
Reliance, India’s largest mobile-phone operator after Bharti, had 150 million connections at the end of December, according to the nation’s telecommunications regulator.
Net sales fell to 48.24 billion rupees from 48.65 billion rupees a year earlier, according to the statement. That’s lower than the 52.1 billion-rupee median of 21 analysts’ estimates.
Refinancing Debt
Financial charges at the company almost tripled to 3.78 billion rupees in the third quarter, according to the statement.
Reliance said it will refinance about $1.18 billion of foreign-currency debt due March 1, according to a company press release today. China Development Bank Corp., Export-Import Bank of China and Industrial & Commercial Bank of China will help the Indian operator extend the maturity of the loans by seven years at an interest rate of about 5 percent.
Earnings before interest, taxes, depreciation and amortization, or Ebitda, fell to 16.1 billion rupees from 16.7 billion rupees a year earlier, while the Ebitda margin declined to 31.9 percent from 33.3 percent a year earlier.
Stock Performance
Reliance fell 1.2 percent to 94 rupees at close in Mumbai, before the earnings were announced. The stock has gained 34 percent this year, compared with the 15 percent jump in the benchmark Sensitive Index (SENSEX), or Sensex. Bharti has risen 1.9 percent.
Bharti this week reported third-quarter profit fell 22 percent to 10.1 billion rupees. The company’s Indian customers cut phone usage 7 percent in the quarter, after it raised call rates.
India’s highest court on Feb. 2 canceled 122 second- generation mobile-phone licenses, including all the permits used by the local units of Emirates Telecommunications Corp., or Etisalat, and Norway’s Telenor ASA. (TEL)
Etisalat and Telenor had purchased stakes in Indian companies that won the permits. The court scrapped the licenses, sold in 2008, saying they were acquired through an arbitrary and “unconstitutional exercise.”
Reliance won 3G wireless permits in 13 of India’s 22 telecommunication zones in May 2010.
Reliance plans to raise as much as $1.5 billion through a Singapore listing of its submarine cable assets, a person familiar with the matter said last month. It may sell 75 percent of the FLAG Telecom unit of Reliance Globalcom, a subsidiary of Reliance Communications, in an initial public offering, according to the person.
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Thursday, February 9, 2012
Tata Steel Unexpectedly Turns to Loss By Abhishek Shanker - Feb 9, 2012
Tata Steel Ltd. (TATA), India’s biggest producer, swung to an unexpected loss in its third quarter after raw material costs gained and demand and prices fell in Europe, its largest market.
The loss, including that of unit Tata Steel Europe Ltd., was 6.03 billion rupees ($122 million) in the three months ended Dec. 31, compared with a profit of 10 billion rupees a year earlier, the Mumbai-based company said yesterday in a statement. The median profit estimate of 28 analysts in a Bloomberg survey was 2.57 billion rupees. Sales gained 15 percent to 329.6 billion rupees.
The debt crisis in Europe, which contributes about two- thirds of Tata’s production, has cut steel demand and prices. Global use of the alloy will rise 4.5 percent in 2012, the slowest in three years, according to the median estimate of 14 steelmakers, analysts and traders surveyed by Bloomberg.
Total costs rose 22 percent to 325.5 billion rupees, while raw material expenses climbed 21 percent to 126.2 billion rupees in the quarter. Tata Steel, which had a net debt of $9.52 billion rupees as of Dec. 31, earned 1.38 billion rupees from sources other than its main business, the company said.
Tata Steel Europe Chief Executive Officer Karl-Ulrich Koehler in November predicted a “difficult” third quarter. The European unit, which buys all the raw material it needs from outside suppliers, faced a 17 percent increase in coking coal prices, compared with a 3.5 percent increase in the price of steel hot-rolled coils in the last quarter.
India Demand
Demand for the alloy is expected to improve should India’s central bank lower interest rates, Managing Director H.M. Nerurkar told reporters yesterday in Mumbai. The Reserve Bank of India increased interest rates 13 times since the start of 2010 to curb inflation. Subir Gokarn, the deputy governor of the bank, said last month the monetary cycle has peaked.
Tata Steel plans to add 2.9 million tons of annual capacity at its Jamshedpur facility this quarter, taking total production to 10 million tons, Nerurkar said.
The company on Dec. 2 said it mothballed the Llanwern hot strip mill in Newport, U.K., cutting 115 jobs. The mill will remain shut until the U.K. economy and steel demand justify a restart, it said then.
Rival ArcelorMittal (MT), the world’s largest steel producer, reported on Feb. 7 fourth-quarter earnings before interest, tax, depreciation and amortization fell to $1.71 billion from $1.85 billion a year earlier. That compared with the $1.68 billion median estimate of 16 analysts surveyed by Bloomberg. First-half Ebitda is likely to exceed results in the prior six months, while still being lower than a year earlier, the company said in a statement.
Tata Steel shares gained 0.3 percent to 452.15 rupees in Mumbai yesterday. The earnings were announced after the market closed. The benchmark Sensitive Index gained 0.7 percent.
To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The loss, including that of unit Tata Steel Europe Ltd., was 6.03 billion rupees ($122 million) in the three months ended Dec. 31, compared with a profit of 10 billion rupees a year earlier, the Mumbai-based company said yesterday in a statement. The median profit estimate of 28 analysts in a Bloomberg survey was 2.57 billion rupees. Sales gained 15 percent to 329.6 billion rupees.
The debt crisis in Europe, which contributes about two- thirds of Tata’s production, has cut steel demand and prices. Global use of the alloy will rise 4.5 percent in 2012, the slowest in three years, according to the median estimate of 14 steelmakers, analysts and traders surveyed by Bloomberg.
Total costs rose 22 percent to 325.5 billion rupees, while raw material expenses climbed 21 percent to 126.2 billion rupees in the quarter. Tata Steel, which had a net debt of $9.52 billion rupees as of Dec. 31, earned 1.38 billion rupees from sources other than its main business, the company said.
Tata Steel Europe Chief Executive Officer Karl-Ulrich Koehler in November predicted a “difficult” third quarter. The European unit, which buys all the raw material it needs from outside suppliers, faced a 17 percent increase in coking coal prices, compared with a 3.5 percent increase in the price of steel hot-rolled coils in the last quarter.
India Demand
Demand for the alloy is expected to improve should India’s central bank lower interest rates, Managing Director H.M. Nerurkar told reporters yesterday in Mumbai. The Reserve Bank of India increased interest rates 13 times since the start of 2010 to curb inflation. Subir Gokarn, the deputy governor of the bank, said last month the monetary cycle has peaked.
Tata Steel plans to add 2.9 million tons of annual capacity at its Jamshedpur facility this quarter, taking total production to 10 million tons, Nerurkar said.
The company on Dec. 2 said it mothballed the Llanwern hot strip mill in Newport, U.K., cutting 115 jobs. The mill will remain shut until the U.K. economy and steel demand justify a restart, it said then.
Rival ArcelorMittal (MT), the world’s largest steel producer, reported on Feb. 7 fourth-quarter earnings before interest, tax, depreciation and amortization fell to $1.71 billion from $1.85 billion a year earlier. That compared with the $1.68 billion median estimate of 16 analysts surveyed by Bloomberg. First-half Ebitda is likely to exceed results in the prior six months, while still being lower than a year earlier, the company said in a statement.
Tata Steel shares gained 0.3 percent to 452.15 rupees in Mumbai yesterday. The earnings were announced after the market closed. The benchmark Sensitive Index gained 0.7 percent.
To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, February 8, 2012
Oil Trades Near One-Week High as U.S. Stockpiles Counter Europe Concern By Ben Sharples - Feb 8, 2012
Oil traded near the highest price in more than a week after U.S. crude stockpiles increased less than forecast, countering concern that Europe’s debt crisis will worsen as Greece struggles to agree on terms for a bailout.
Futures were little changed after advancing for a second day yesterday. Crude inventories rose 304,000 barrels last week, according to the Department of Energy, compared with an estimated 2.5 million barrel gain in a Bloomberg News survey. Greek Prime Minister Lucas Papademos summoned the country’s international lenders for further discussions today after failing to get full agreement from his coalition supporters on economic measures needed for a second aid package.
“Demand, particularly in the U.S., is still there,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney. “We’ve been side-swiped by Europe in terms of its slowdown.”
Oil for March delivery was at $98.74 a barrel, up 3 cents, in electronic trading on the New York Mercantile Exchange at 12:03 p.m. Sydney time. The contract yesterday increased 30 cents, or 0.3 percent, to $98.71, the highest settlement since Jan. 30. Prices are 14 percent higher the past year.
Brent oil for March settlement rose 32 cents to $117.52 a barrel on the ICE Futures Europe exchange. The benchmark contract’s premium to New York-traded West Texas Intermediate widened for a second day to $18.78, compared with a record $27.88 on Oct. 14.
Refinery Utilization
U.S. refineries operated at 82.8 percent of capacity last week, up 1 percentage point from the week before, and gasoline production climbed 0.7 percent to 8.63 million barrels a day, according to the Energy Department report yesterday.
Gasoline prices surged to the highest level in more than five months on speculation that refinery shutdowns in Europe and the U.S. will trigger a supply crunch. Gasoline for March delivery climbed 0.61 cents to $2.9813 a gallon on the New York Mercantile Exchange today. It rose 4.77 cents to $2.9752 a gallon yesterday, the highest settlement since Aug. 31 and the largest gain since Jan. 27.
Imports of the motor fuel dropped 32 percent last week, according to the Energy Department. Stockpiles rose 1.6 million barrels, compared with a forecast for an 875,000 barrel gain. Distillate inventories, a category that includes heating oil and diesel, increased 1.2 million barrels, compared with a projection for an 875,000 barrel decline.
Greece’s government is struggling to arrange financing to meet a 14.5 billion-euro ($19.2 billion) bond payment on March 20, risking a collapse of the economy and a new round of contagion in the euro area. Political leaders have agreed on all the measures needed for a second international aid package except cuts to pensions, Panos Beglitis, a spokesman for the Pasok socialist party, told reporters in Athens.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Futures were little changed after advancing for a second day yesterday. Crude inventories rose 304,000 barrels last week, according to the Department of Energy, compared with an estimated 2.5 million barrel gain in a Bloomberg News survey. Greek Prime Minister Lucas Papademos summoned the country’s international lenders for further discussions today after failing to get full agreement from his coalition supporters on economic measures needed for a second aid package.
“Demand, particularly in the U.S., is still there,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity markets newsletter in Sydney. “We’ve been side-swiped by Europe in terms of its slowdown.”
Oil for March delivery was at $98.74 a barrel, up 3 cents, in electronic trading on the New York Mercantile Exchange at 12:03 p.m. Sydney time. The contract yesterday increased 30 cents, or 0.3 percent, to $98.71, the highest settlement since Jan. 30. Prices are 14 percent higher the past year.
Brent oil for March settlement rose 32 cents to $117.52 a barrel on the ICE Futures Europe exchange. The benchmark contract’s premium to New York-traded West Texas Intermediate widened for a second day to $18.78, compared with a record $27.88 on Oct. 14.
Refinery Utilization
U.S. refineries operated at 82.8 percent of capacity last week, up 1 percentage point from the week before, and gasoline production climbed 0.7 percent to 8.63 million barrels a day, according to the Energy Department report yesterday.
Gasoline prices surged to the highest level in more than five months on speculation that refinery shutdowns in Europe and the U.S. will trigger a supply crunch. Gasoline for March delivery climbed 0.61 cents to $2.9813 a gallon on the New York Mercantile Exchange today. It rose 4.77 cents to $2.9752 a gallon yesterday, the highest settlement since Aug. 31 and the largest gain since Jan. 27.
Imports of the motor fuel dropped 32 percent last week, according to the Energy Department. Stockpiles rose 1.6 million barrels, compared with a forecast for an 875,000 barrel gain. Distillate inventories, a category that includes heating oil and diesel, increased 1.2 million barrels, compared with a projection for an 875,000 barrel decline.
Greece’s government is struggling to arrange financing to meet a 14.5 billion-euro ($19.2 billion) bond payment on March 20, risking a collapse of the economy and a new round of contagion in the euro area. Political leaders have agreed on all the measures needed for a second international aid package except cuts to pensions, Panos Beglitis, a spokesman for the Pasok socialist party, told reporters in Athens.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, February 7, 2012
DBS Expands in Asia as CEO Chases Returns By Sanat Vallikappen - Feb 7, 2012
Piyush Gupta, chief executive officer of DBS Group Holdings Ltd., Southeast Asia’s largest bank, picked banking over a passion for bird-watching three decades ago. Now his plans for regional expansion are taking flight.
Gupta, who joined the Singapore-based lender in 2009 after a 27-year career at Citigroup Inc., is positioning DBS to take advantage of rising wealth in Asia and to reduce reliance on its home market.
The shift in strategy has delivered profit of more than S$700 million ($560 million) in four of the last five quarters, a level last reached in mid-2004. Fourth-quarter and full-year results will be announced Feb. 10.
“Over the past year and a half, you can see that DBS has become a much more dynamic organization,” said Yasmin Krishan, a client director who specializes in the financial industry at EMA Partners, a London-based executive search firm. “Before, they were regarded as a clumsy giant. You never thought of DBS as this exciting place.”
Gupta, 52, has focused on building DBS’s wealth-management business to reach rich Asians, particularly in China, India and Indonesia. He has hired new management, introduced products including Chinese yuan-denominated investments and pledged to spend S$250 million to expand over the next five years. He also set a 2013 target for the bank of 12 percent return on equity, which was 10.8 percent in the third quarter of last year.
Paying Off
The effort is paying off. Revenue in China for the first nine months of 2011 rose 47 percent from a year earlier, helped by the purchase of Royal Bank of Scotland Group Plc’s retail-and commercial-banking business in the country. It was up 35 percent in Indonesia, 34 percent in India and 18 percent in Taiwan. Fee revenue from wealth management jumped 58 percent.
Gupta also spent the last two years “putting the basics into place,” he told the Foreign Correspondents’ Association in Singapore in November. That meant standardizing management processes and strengthening technology and infrastructure. It included improving operations at its Hong Kong unit, the former Dao Heng Bank Group Ltd. acquired in 2001 for $5.4 billion.
“When I took a deep look at the business, it appeared to me that we had never put in place the plumbing or the architecture required to run a multinational company,” he said.
Uniform Practices
Before Gupta took over at DBS, managers didn’t know whether a branch or a customer was profitable, and they lacked uniform practices, Gupta said. He cited an example of an employee who, to prove a point, ran a credit application through the systems in Hong Kong and Singapore. It was approved in Hong Kong and declined in Singapore.
Gupta said he found striking differences from the procedures, customer focus and information systems at Citigroup, notwithstanding the New York-based bank’s $45 billion government bailout in 2008. Gupta, who grew up in New Delhi and earned a Master’s of Business Administration from the Indian Institute of Management in Ahmedabad, joined Citigroup in 1982, rising to head its Southeast Asia, Australia and New Zealand operations.
“There’s no question that a large part of what I learned at Citi is what we’re trying to implement at DBS,” Gupta said in an interview in November.
He set about cutting turnaround time for credit applications and new accounts, shortening wait times at the DBS call center and making branches and ATMs more efficient.
“He’s been a sharp executor,” said Sachin Nikhare, a Singapore-based banking analyst at IIFL Capital Pte.
Corporate Banking
Gupta said he wants DBS to be seen as a strong player in corporate banking in Asia, including in trade financing, cash management and treasury services.
“We want to move from being a loan house, and we were heavily a loan house, to being a diversified corporate bank,” Gupta said.
Gupta is seeking to lower Singapore’s contribution to the bank’s total revenue to 40 percent from 60 percent in five years by growing faster abroad than at home. Greater China and south and Southeast Asia would each account for 30 percent, DBS said. For the first nine months of 2011, revenue from Singapore accounted for 62 percent of the total, unchanged from a year earlier.
At a media event in October, Gupta said the bank will continue to build the Singapore consumer franchise, which it inherited when it bought Singapore’s Post Office Savings Bank and its subsidiary Credit POSB Pte in 1998.
Government Stake
DBS was established in 1968 as a government-controlled development bank to spur Singapore’s industrialization three years after the country’s founding. Temasek Holdings Pte, the state-owned investment company, controls 27 percent of the bank. Peter Seah Lim Huat, chairman of DBS, is a member of Temasek’s advisory panel. Temasek Deputy Chairman Kwa Chong Seng sits on the board of DBS.
Gupta said DBS was a local commercial bank until the end of the 1990s, run mostly by people seconded from the government. DBS then departed from this by hiring CEOs with deal-making experience or investment-banking backgrounds, he said.
From the early 2000s, DBS was run “almost more as an investment bank than a commercial bank,” said Matthew Smith, an analyst at Macquarie Capital Securities Singapore Pte.
When DBS hired Gupta’s predecessor, Richard Stanley, who ran Citigroup in China, the bank touted his deal-making skills. Stanley, who died in April 2009 after being diagnosed with leukemia, had replaced Jackson Tai, who joined from New York- based JPMorgan Chase & Co., where he was a managing director in the investment-banking division.
Gupta was appointed for his “strategic, yet detail- oriented” approach, according to a release announcing his appointment in September 2009.
Lack of Boundaries
Gupta has kept revenue from investment banking at the same level as his predecessors -- it was 2.7 percent in the first nine months of 2011, the same as in 2007 -- even as deal-making and capital-raising has declined since its 2007 peak.
A lack of “boundaries” under his predecessors meant the bank ended up with a lot of “hobby businesses” in the Middle East, Britain and the U.S., Gupta said. DBS had to write down more than S$1 billion in 2009 for nonperforming corporate loans in these areas as it turned its attention to Asia operations.
Revenue from what DBS calls the rest of the world dropped to 3.6 percent for the first nine months of 2011 from 5.1 percent at the end of 2009.
Clear Vision
Like his predecessors, “Piyush also has ambitions of being a regional bank, but what he has done differently is that he has clearly articulated the vision, quantified it and has been a sharp executor,” said Nikhare of IIFL Securities. “While others would say, ‘We want to be a regional bank with a large Asia presence,’ he has firstly acknowledged, ‘We are a Singaporean bank with a regional presence.’”
DBS said in November 2010 it was aiming for “double- digit” percentage growth in the wealth-management business annually from emerging markets over the next few years, and to increase managed assets to $50 billion over three years. Managed assets grew $2 billion to $37 billion by the end of November, according to DBS.
To help reach the goal, DBS hired Su Shan Tan from Morgan Stanley to head the private banking unit in 2010 and started a special business unit last year for clients with investable assets of at least S$1.5 million, a separate tier from the bank’s services for people with more than S$5 million to invest. The lender also ran its first advertising campaign in Hong Kong and Singapore aimed at wealthy depositors last year.
Getting Aggressive
“The private bank is getting very aggressive,” said Krishan of EMA Partners. “They’re recruiting. They’re coming up with products. They’re doing a lot more in that space.”
DBS’s private bank ranked 10th by assets in Asia in 2010, according to a Private Banker International survey, ahead of Bank of Singapore, the private-banking arm of Oversea-Chinese Banking Corp. Asia’s top three wealth managers were UBS AG, Citigroup and HSBC Holdings Plc, according to the survey.
Asia-Pacific millionaires outnumbered those in Europe for the first time in 2010, according to a survey by Capgemini SA and Bank of America Corp.’s Merrill Lynch Global Wealth Management. Asia’s 3.3 million high-net-worth individuals had $10.8 trillion in assets compared with the $10.2 trillion accumulated by their 3.1 million counterparts in Europe, according to the report published last June.
DBS has risen 1 percent in Singapore trading since Gupta took over on Nov. 9, 2009, while the benchmark Straits Times Index has gained 11 percent. Rivals United Overseas Bank Ltd. and Oversea-Chinese Banking lost 1.3 percent and gained 10 percent, respectively. OCBC has a larger presence in more profitable loan markets such as Malaysia and Indonesia.
‘Extremely Energetic’
“One reason for the underperformance of DBS is where we are in the interest-rate cycle, and DBS’s larger presence in low-margin markets such as Singapore, Hong Kong and Taiwan,” said Macquarie’s Smith, who has a neutral rating on DBS. “If interest rates were to rise, DBS could be the biggest beneficiary, aided by their low-cost funding base in Singapore.”
People who know Gupta say he has what it takes to reach the goals he has set for the bank.
“Whatever he puts his mind to, he does it well,” said Krishan of EMA Partners, who has known Gupta since a 1986 picnic outing with a group of friends in Mumbai including her to-be husband who was a Citibank colleague of Gupta’s. “Even outside of the bank, he is an extremely energetic person, very creative. He writes poetry -- fun, humorous, witty stuff.”
While still pursuing his passions for poetry and bird- watching, Gupta advised the 2011 graduating class at the National University of Singapore to find a professional calling as well.
“Going through life with ‘bird-watcher’ on my visiting card,” he said, “just didn’t seem like a tenable option.”
To contact the reporter on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net
To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Gupta, who joined the Singapore-based lender in 2009 after a 27-year career at Citigroup Inc., is positioning DBS to take advantage of rising wealth in Asia and to reduce reliance on its home market.
The shift in strategy has delivered profit of more than S$700 million ($560 million) in four of the last five quarters, a level last reached in mid-2004. Fourth-quarter and full-year results will be announced Feb. 10.
“Over the past year and a half, you can see that DBS has become a much more dynamic organization,” said Yasmin Krishan, a client director who specializes in the financial industry at EMA Partners, a London-based executive search firm. “Before, they were regarded as a clumsy giant. You never thought of DBS as this exciting place.”
Gupta, 52, has focused on building DBS’s wealth-management business to reach rich Asians, particularly in China, India and Indonesia. He has hired new management, introduced products including Chinese yuan-denominated investments and pledged to spend S$250 million to expand over the next five years. He also set a 2013 target for the bank of 12 percent return on equity, which was 10.8 percent in the third quarter of last year.
Paying Off
The effort is paying off. Revenue in China for the first nine months of 2011 rose 47 percent from a year earlier, helped by the purchase of Royal Bank of Scotland Group Plc’s retail-and commercial-banking business in the country. It was up 35 percent in Indonesia, 34 percent in India and 18 percent in Taiwan. Fee revenue from wealth management jumped 58 percent.
Gupta also spent the last two years “putting the basics into place,” he told the Foreign Correspondents’ Association in Singapore in November. That meant standardizing management processes and strengthening technology and infrastructure. It included improving operations at its Hong Kong unit, the former Dao Heng Bank Group Ltd. acquired in 2001 for $5.4 billion.
“When I took a deep look at the business, it appeared to me that we had never put in place the plumbing or the architecture required to run a multinational company,” he said.
Uniform Practices
Before Gupta took over at DBS, managers didn’t know whether a branch or a customer was profitable, and they lacked uniform practices, Gupta said. He cited an example of an employee who, to prove a point, ran a credit application through the systems in Hong Kong and Singapore. It was approved in Hong Kong and declined in Singapore.
Gupta said he found striking differences from the procedures, customer focus and information systems at Citigroup, notwithstanding the New York-based bank’s $45 billion government bailout in 2008. Gupta, who grew up in New Delhi and earned a Master’s of Business Administration from the Indian Institute of Management in Ahmedabad, joined Citigroup in 1982, rising to head its Southeast Asia, Australia and New Zealand operations.
“There’s no question that a large part of what I learned at Citi is what we’re trying to implement at DBS,” Gupta said in an interview in November.
He set about cutting turnaround time for credit applications and new accounts, shortening wait times at the DBS call center and making branches and ATMs more efficient.
“He’s been a sharp executor,” said Sachin Nikhare, a Singapore-based banking analyst at IIFL Capital Pte.
Corporate Banking
Gupta said he wants DBS to be seen as a strong player in corporate banking in Asia, including in trade financing, cash management and treasury services.
“We want to move from being a loan house, and we were heavily a loan house, to being a diversified corporate bank,” Gupta said.
Gupta is seeking to lower Singapore’s contribution to the bank’s total revenue to 40 percent from 60 percent in five years by growing faster abroad than at home. Greater China and south and Southeast Asia would each account for 30 percent, DBS said. For the first nine months of 2011, revenue from Singapore accounted for 62 percent of the total, unchanged from a year earlier.
At a media event in October, Gupta said the bank will continue to build the Singapore consumer franchise, which it inherited when it bought Singapore’s Post Office Savings Bank and its subsidiary Credit POSB Pte in 1998.
Government Stake
DBS was established in 1968 as a government-controlled development bank to spur Singapore’s industrialization three years after the country’s founding. Temasek Holdings Pte, the state-owned investment company, controls 27 percent of the bank. Peter Seah Lim Huat, chairman of DBS, is a member of Temasek’s advisory panel. Temasek Deputy Chairman Kwa Chong Seng sits on the board of DBS.
Gupta said DBS was a local commercial bank until the end of the 1990s, run mostly by people seconded from the government. DBS then departed from this by hiring CEOs with deal-making experience or investment-banking backgrounds, he said.
From the early 2000s, DBS was run “almost more as an investment bank than a commercial bank,” said Matthew Smith, an analyst at Macquarie Capital Securities Singapore Pte.
When DBS hired Gupta’s predecessor, Richard Stanley, who ran Citigroup in China, the bank touted his deal-making skills. Stanley, who died in April 2009 after being diagnosed with leukemia, had replaced Jackson Tai, who joined from New York- based JPMorgan Chase & Co., where he was a managing director in the investment-banking division.
Gupta was appointed for his “strategic, yet detail- oriented” approach, according to a release announcing his appointment in September 2009.
Lack of Boundaries
Gupta has kept revenue from investment banking at the same level as his predecessors -- it was 2.7 percent in the first nine months of 2011, the same as in 2007 -- even as deal-making and capital-raising has declined since its 2007 peak.
A lack of “boundaries” under his predecessors meant the bank ended up with a lot of “hobby businesses” in the Middle East, Britain and the U.S., Gupta said. DBS had to write down more than S$1 billion in 2009 for nonperforming corporate loans in these areas as it turned its attention to Asia operations.
Revenue from what DBS calls the rest of the world dropped to 3.6 percent for the first nine months of 2011 from 5.1 percent at the end of 2009.
Clear Vision
Like his predecessors, “Piyush also has ambitions of being a regional bank, but what he has done differently is that he has clearly articulated the vision, quantified it and has been a sharp executor,” said Nikhare of IIFL Securities. “While others would say, ‘We want to be a regional bank with a large Asia presence,’ he has firstly acknowledged, ‘We are a Singaporean bank with a regional presence.’”
DBS said in November 2010 it was aiming for “double- digit” percentage growth in the wealth-management business annually from emerging markets over the next few years, and to increase managed assets to $50 billion over three years. Managed assets grew $2 billion to $37 billion by the end of November, according to DBS.
To help reach the goal, DBS hired Su Shan Tan from Morgan Stanley to head the private banking unit in 2010 and started a special business unit last year for clients with investable assets of at least S$1.5 million, a separate tier from the bank’s services for people with more than S$5 million to invest. The lender also ran its first advertising campaign in Hong Kong and Singapore aimed at wealthy depositors last year.
Getting Aggressive
“The private bank is getting very aggressive,” said Krishan of EMA Partners. “They’re recruiting. They’re coming up with products. They’re doing a lot more in that space.”
DBS’s private bank ranked 10th by assets in Asia in 2010, according to a Private Banker International survey, ahead of Bank of Singapore, the private-banking arm of Oversea-Chinese Banking Corp. Asia’s top three wealth managers were UBS AG, Citigroup and HSBC Holdings Plc, according to the survey.
Asia-Pacific millionaires outnumbered those in Europe for the first time in 2010, according to a survey by Capgemini SA and Bank of America Corp.’s Merrill Lynch Global Wealth Management. Asia’s 3.3 million high-net-worth individuals had $10.8 trillion in assets compared with the $10.2 trillion accumulated by their 3.1 million counterparts in Europe, according to the report published last June.
DBS has risen 1 percent in Singapore trading since Gupta took over on Nov. 9, 2009, while the benchmark Straits Times Index has gained 11 percent. Rivals United Overseas Bank Ltd. and Oversea-Chinese Banking lost 1.3 percent and gained 10 percent, respectively. OCBC has a larger presence in more profitable loan markets such as Malaysia and Indonesia.
‘Extremely Energetic’
“One reason for the underperformance of DBS is where we are in the interest-rate cycle, and DBS’s larger presence in low-margin markets such as Singapore, Hong Kong and Taiwan,” said Macquarie’s Smith, who has a neutral rating on DBS. “If interest rates were to rise, DBS could be the biggest beneficiary, aided by their low-cost funding base in Singapore.”
People who know Gupta say he has what it takes to reach the goals he has set for the bank.
“Whatever he puts his mind to, he does it well,” said Krishan of EMA Partners, who has known Gupta since a 1986 picnic outing with a group of friends in Mumbai including her to-be husband who was a Citibank colleague of Gupta’s. “Even outside of the bank, he is an extremely energetic person, very creative. He writes poetry -- fun, humorous, witty stuff.”
While still pursuing his passions for poetry and bird- watching, Gupta advised the 2011 graduating class at the National University of Singapore to find a professional calling as well.
“Going through life with ‘bird-watcher’ on my visiting card,” he said, “just didn’t seem like a tenable option.”
To contact the reporter on this story: Sanat Vallikappen in Singapore at vallikappen@bloomberg.net
To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Monday, February 6, 2012
Pakistan Must Cut Budget Deficits to Shield ‘Vulnerable’ Economy, IMF Says By Sandrine Rastello and Haris Anwar - Feb 6, 2012
Pakistan must stem risks to a “highly vulnerable” economy that include inflation projected at 12 percent, a widening budget deficit and declining currency reserves, the International Monetary Fund said.
The Washington-based IMF called on Pakistan to broaden the tax base, eliminate some subsidies and curtail central bank financing of a budget shortfall that may rise to 7 percent of gross domestic product this fiscal year.
Floods in August that forced more than 1 million people from their homes have added to the woes of the world’s second- largest majority-Muslim nation, a key U.S. partner in the battle against al-Qaeda. Economic growth estimated at 3.4 percent in the fiscal year ending in June 2012 will fall short of the 7 percent pace needed to provide work for the 2 million people who enter the labor force each year, the fund said in a report release yesterday.
“Two major floods, difficulties in implementing key policy reforms, and a more challenging global environment have combined to limit growth and employment creation and made the economy highly vulnerable, with few buffers to absorb shocks,” the fund said.
The government of Prime Minister Yousuf Raza Gilani has struggled to revive an economy hurt by political instability and militant attacks that have killed at least 35,000 people since 2006, according to estimates from the government. Gilani himself faces a contempt of court charge that threatens to force him from office.
Rupee Weakens
Pakistan’s rupee has declined 0.5 percent against the dollar in the past year and fell to a record on Jan. 9 on concern foreign reserves will shrink as international aid dwindles. Reserves have fallen by about $2 billion in the last six months and may weaken further, the IMF said.
The U.S., the country’s largest export market and aid provider, held back $800 million in military assistance in July out of $2 billion pledged for this fiscal year because of disputes over how to combat terrorism.
Relations between the U.S. and Pakistan are critical to the Obama administration’s battle with al-Qaeda’s leaders in Pakistan and its plans to end the American combat role in Afghanistan within two years. Ties have become strained since U.S. special operations forces killed Osama bin Laden in a compound in the Pakistani city of Abbottabad last May.
IMF Loan
An $11.3 billion IMF loan to Pakistan expired in September, with disbursements suspended in May 2010 after the country failed to meet conditions attached to it. The South Asian nation turned to the IMF for aid in 2008 after its foreign reserves shrank.
Pakistan needs to start repaying the loan this month, and authorities have not requested another one, IMF mission chief Adnan Mazarei said on a conference call yesterday.
“The way we recommended to the authorities to address these vulnerabilities is to recognize that we are all, including Pakistan, living in a more dangerous environment because of the deteriorating global environment and to build buffers,” Mazarei said.
The Washington-based IMF last month lowered its estimate for global growth this year and next and warned that the European debt crisis could plunge the world into another recession if it were to worsen.
The IMF report said Pakistan’s “Monetary policy is now too accommodative, and should be tightened if inflation or external pressures increase.” It added that “central bank financing of the budget needs to be curtailed, and greater operational independence of the central bank needs to be secured.”
Emerging Markets
Emerging markets from India to Thailand have eased policy as Europe’s debt crisis hampers the global economy. Pakistan’s central bank left the discount rate at 12 percent in November, pausing to gauge the impact of a 2 percentage-point reduction since the end of July. The next rate decision for the $175 billion economy is due Feb. 11.
Pakistan’s gross domestic product rose 2.4 percent in the year through June 2011, one of the smallest expansions in a decade.
To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Haris Anwar in Islamabad at hanwar2@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The Washington-based IMF called on Pakistan to broaden the tax base, eliminate some subsidies and curtail central bank financing of a budget shortfall that may rise to 7 percent of gross domestic product this fiscal year.
Floods in August that forced more than 1 million people from their homes have added to the woes of the world’s second- largest majority-Muslim nation, a key U.S. partner in the battle against al-Qaeda. Economic growth estimated at 3.4 percent in the fiscal year ending in June 2012 will fall short of the 7 percent pace needed to provide work for the 2 million people who enter the labor force each year, the fund said in a report release yesterday.
“Two major floods, difficulties in implementing key policy reforms, and a more challenging global environment have combined to limit growth and employment creation and made the economy highly vulnerable, with few buffers to absorb shocks,” the fund said.
The government of Prime Minister Yousuf Raza Gilani has struggled to revive an economy hurt by political instability and militant attacks that have killed at least 35,000 people since 2006, according to estimates from the government. Gilani himself faces a contempt of court charge that threatens to force him from office.
Rupee Weakens
Pakistan’s rupee has declined 0.5 percent against the dollar in the past year and fell to a record on Jan. 9 on concern foreign reserves will shrink as international aid dwindles. Reserves have fallen by about $2 billion in the last six months and may weaken further, the IMF said.
The U.S., the country’s largest export market and aid provider, held back $800 million in military assistance in July out of $2 billion pledged for this fiscal year because of disputes over how to combat terrorism.
Relations between the U.S. and Pakistan are critical to the Obama administration’s battle with al-Qaeda’s leaders in Pakistan and its plans to end the American combat role in Afghanistan within two years. Ties have become strained since U.S. special operations forces killed Osama bin Laden in a compound in the Pakistani city of Abbottabad last May.
IMF Loan
An $11.3 billion IMF loan to Pakistan expired in September, with disbursements suspended in May 2010 after the country failed to meet conditions attached to it. The South Asian nation turned to the IMF for aid in 2008 after its foreign reserves shrank.
Pakistan needs to start repaying the loan this month, and authorities have not requested another one, IMF mission chief Adnan Mazarei said on a conference call yesterday.
“The way we recommended to the authorities to address these vulnerabilities is to recognize that we are all, including Pakistan, living in a more dangerous environment because of the deteriorating global environment and to build buffers,” Mazarei said.
The Washington-based IMF last month lowered its estimate for global growth this year and next and warned that the European debt crisis could plunge the world into another recession if it were to worsen.
The IMF report said Pakistan’s “Monetary policy is now too accommodative, and should be tightened if inflation or external pressures increase.” It added that “central bank financing of the budget needs to be curtailed, and greater operational independence of the central bank needs to be secured.”
Emerging Markets
Emerging markets from India to Thailand have eased policy as Europe’s debt crisis hampers the global economy. Pakistan’s central bank left the discount rate at 12 percent in November, pausing to gauge the impact of a 2 percentage-point reduction since the end of July. The next rate decision for the $175 billion economy is due Feb. 11.
Pakistan’s gross domestic product rose 2.4 percent in the year through June 2011, one of the smallest expansions in a decade.
To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Haris Anwar in Islamabad at hanwar2@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, February 5, 2012
Court Rejects Petition Against Home Minister Chidambaram in Airwaves Case By Pratap Patnaik and Anurag Joshi - Feb 4, 2012
An Indian court dismissed a petition asking that Home Minister Palaniappan Chidambaram be probed for corruption in a 2008 sale of phone licenses that were canceled by the nation’s judiciary this week.
The rejection comes as a relief to Prime Minister Manmohan Singh’s government, which has been assailed by allegations of graft and policy drift for more than a year after a former Cabinet minister and company executives were charged with conspiring to sell phone permits at below-market rates.
The court’s order followed a petition by regional politician Subramanian Swamy, who alleged that as finance minister the permits were awarded, Chidambaram was party to discussions on the pricing of airwaves. During arguments, Swamy has said the evidences he produced before the court is sufficient to establish Chidambaram is as culpable as Andimuthu Raja, a former telecommunications minister who is in jail while facing trial in the scam.
“This is a small relief for Chidambaram and the government,” N. Bhaskara Rao, New Delhi-based chairman of the Centre for Media Studies, said in a telephone interview. “Recent developments have negative implications not just for telecommunications but other sectors also. Foreign investors will be concerned and there will be a pause in investments.”
Swamy plans to challenge the dismissal of his petition in a higher court, he told reporters in New Delhi today.
Resignation Demanded
While hearing a separate plea from Swamy, the Supreme Court on Feb. 2 left it to the trial court to decide whether to probe the role of Chidambaram in the phone-permit case. In another order, Supreme Court Justices G.S. Singhvi and A.K. Ganguly canceled 122 permits to run cellular services that were awarded in 2008, saying the allocation was done in an arbitrary and unconstitutional manner.
The main opposition Bharatiya Janata Party has demanded the home minister’s resignation, while the ruling Congress party has rejected Swamy’s allegations.
Chidambaram, 66, a lawyer and Harvard Business School Graduate, is one of the most prominent members of the Congress- led government. He was finance minister from 2004 until 2008, and took over as home minister following the November 2008 Mumbai terrorist attacks. Chidambaram denies approving the pricing, saying last year he urged an auction of the permits instead of their issuance for fees fixed more than six years earlier.
Revenue Loss
India’s chief auditor said the first-come, first-serve sale four years ago may have lowered government revenue by $31 billion. The Central Bureau of Investigation put the loss to the government from the license awards at a lower $4.9 billion.
Raja and company executives face charges they conspired to grant permits to unqualified companies for personal benefit. All deny wrongdoing and are on trial.
Allegations of corruption weakened Singh’s government, stalling its legislative agenda for much of the last 14 months. Street protests and hunger strikes triggered appeals from business leaders to curb graft that has dented investor confidence in Asia’s third-largest economy.
To contact the reporters on this story: Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net; Anurag Joshi in Mumbai at ajoshi53@bloomberg.net
To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The rejection comes as a relief to Prime Minister Manmohan Singh’s government, which has been assailed by allegations of graft and policy drift for more than a year after a former Cabinet minister and company executives were charged with conspiring to sell phone permits at below-market rates.
The court’s order followed a petition by regional politician Subramanian Swamy, who alleged that as finance minister the permits were awarded, Chidambaram was party to discussions on the pricing of airwaves. During arguments, Swamy has said the evidences he produced before the court is sufficient to establish Chidambaram is as culpable as Andimuthu Raja, a former telecommunications minister who is in jail while facing trial in the scam.
“This is a small relief for Chidambaram and the government,” N. Bhaskara Rao, New Delhi-based chairman of the Centre for Media Studies, said in a telephone interview. “Recent developments have negative implications not just for telecommunications but other sectors also. Foreign investors will be concerned and there will be a pause in investments.”
Swamy plans to challenge the dismissal of his petition in a higher court, he told reporters in New Delhi today.
Resignation Demanded
While hearing a separate plea from Swamy, the Supreme Court on Feb. 2 left it to the trial court to decide whether to probe the role of Chidambaram in the phone-permit case. In another order, Supreme Court Justices G.S. Singhvi and A.K. Ganguly canceled 122 permits to run cellular services that were awarded in 2008, saying the allocation was done in an arbitrary and unconstitutional manner.
The main opposition Bharatiya Janata Party has demanded the home minister’s resignation, while the ruling Congress party has rejected Swamy’s allegations.
Chidambaram, 66, a lawyer and Harvard Business School Graduate, is one of the most prominent members of the Congress- led government. He was finance minister from 2004 until 2008, and took over as home minister following the November 2008 Mumbai terrorist attacks. Chidambaram denies approving the pricing, saying last year he urged an auction of the permits instead of their issuance for fees fixed more than six years earlier.
Revenue Loss
India’s chief auditor said the first-come, first-serve sale four years ago may have lowered government revenue by $31 billion. The Central Bureau of Investigation put the loss to the government from the license awards at a lower $4.9 billion.
Raja and company executives face charges they conspired to grant permits to unqualified companies for personal benefit. All deny wrongdoing and are on trial.
Allegations of corruption weakened Singh’s government, stalling its legislative agenda for much of the last 14 months. Street protests and hunger strikes triggered appeals from business leaders to curb graft that has dented investor confidence in Asia’s third-largest economy.
To contact the reporters on this story: Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net; Anurag Joshi in Mumbai at ajoshi53@bloomberg.net
To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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