Chaanakya Tracking the economy….

A Wealth Incorporation

Publication

November 16, 2012

Vol. 6

Issue 16

Christ University

Institute of Management

2

Index

News

National 3

International 5

Rates and Graphs 7

Contemporary Articles

Fiscal Cliff: What Does it Mean for India? 9

Remedy for Too-Big-To-Fail Institutions? 10

Alumni Speak: Mr. Anubhav Jain 11

Debate

Should RBI issue Banking Licenses to NBFCs? 12

Stock Watch

PowerGrid Corporation of India Limited 13

Commodity Market

Rice 17

Scams

The UP Rice Scam 18

Did You Know? 19

Crossword 20

3

National News

Srivishnu Garbham [I MBA I]

Manapuram Finance Q2 net drops 20% at `107.70 cr

Manapuram Finance Ltd reported 20 per cent decline in net profit at `107.70 crore for the

second quarter. Its net profit in July-September period of the previous fiscal was at `135.30

crore. Revenues of the company during the reported quarter marginally declined to `607.75

crore, from `615.06 crore over the corresponding period a year ago. The total assets of the

company stood at `12,461.03 crore as of September 30, 2012 against `12,076.84 crore as of March 31, 2012.

Non-banking financial sector seeing consolidation

The Non-banking financial sector was seeing consolidation, with companies placed

comfortably on the capital front, said a Reserve Bank of India (RBI) report on banking in

India, 2011-12.Currently, the sector comprises a heterogeneous group of institutions, which caters to a wide range of financial requirements. Major intermediaries include financial

institutions, non-banking financial companies (NBFCs) and primary dealers.

Micro Finance investors now eye on NBFCs

Given the ongoing churn and regulatory uncertainty in the Indian microfinance industry,

investors looking to hedge risks and diversify portfolios are now betting on the country's non-banking financial companies. Global development finance institutions, which have

together invested close to $500 million (`2,700 crore) in the Indian microfinance sector, are

exploring opportunities in the NBFC space - another sector that promises financial inclusion for India's poor.

Muthoot Finance ties up to offer National Pension Scheme

Kerala-based Muthoot Finance Ltd, a leading gold loan company, said it has tied up with

Pension Fund Regulatory and Development Authority (PFRDA), an autonomous body under

the Ministry of Finance, to act as a service provider for the National pension scheme. Muthoot Finance is the only Non-Banking Financial Company in the state to be approved by

the PFRDA to act as a service provider for the pension plan, a company release said here.

Essar Shipping sinks on forex loss, finance costs in Q2

Essar Shipping reported a consolidated net loss of `35.99 crore for the quarter end, largely

due to increased finance costs and a forex loss of `50.20 crore. The company had reported a

net loss of `85.65 crore during the corresponding quarter of the last fiscal. Total income from

operations was up 30.36 per cent to `782.41 crore during the current quarter vis-a-vis

`600.20 crore in the same period of last year. During the quarter, company‘s total

expenditure increased by over 10 per cent to `678.36 crore, while the finance cost rose by

16.53 per cent to `92.86 crore. Besides, the company also incurred a forex loss of `50.20

crore during the quarter.

4

Diwali demand for Chinese goods up 45% ASSOCHAM

The craze for Chinese products as Diwali gifts has been rising with demand going up by 45

per cent, a quick survey by ASSOCHAM-Social Development Foundation (ASDF) says. The

Associated Chamber of Commerce and Industry of India survey said the Chinese items that were most sought after were fancy lights, lampshades, Ganesha and Laxmi idols, rangolis and

crackers. Over 78 per cent costumers said Chinese lights were almost 50 per cent

cheaper compared with Indian lights and had greater variety, saving nearly 35 per cent of Diwali budgets at a time of rising inflation. Nearly 72 per cent traders said demand for the

earthen diyas has been dipping year after year in favour of designer diyas and Chinese lights.

Muthoot Finance looking to enter white label ATM space

With the Reserve Bank of India (RBI) tightening the rules for gold loan companies, Muthoot

Finance has decided to diversify into the white label ATMs (WLAs) business. The non-banking finance company, which is engaged in the business of financing against the

security of gold ornaments, wants to leverage its network of 3,853 branches spread across 21

States and four Union Territories to set up WLAs.

To accelerate the growth and penetration of ATMs in the country, the RBI, in February 2012,

decided to permit non-banks to set up, own and operate ATMs. The central bank said that the ATMs rolled out by non-banks would be in the nature of WLAs and would provide ATM

services to customers of all banks.

Panels to deal with CST compensation ,GST framework issues

With the States firm on seeking a settlement on the Central Sales Tax (CST) compensation

issue before moving ahead with rollout of the Goods and Service Tax (GST), Finance Minister P. Chidambaram announced that two committees would be constituted to address

the contentious issues and move ahead on implementation of the indirect tax regime.

India slips to 40th slot in World Economic Forum’s financial development index

India has slipped four places in a raking of 62 leading financial systems and capital markets,

because of weak institutional and business environment, the World Economic Forum said in a report. India is ranked at 40th place in the fifth edition of the World Economic Forum's

Financial Development Report 2012, down four spots from last year.

Finance Ministry to lower GDP projection in mid-year economic review

Finance Ministry is likely to lower economic growth projection for the current fiscal to 5.7-6

per cent in its mid-term review of the state of economy to be tabled in Parliament next month. In the budget for 2012-13, the then finance minister Pranab Mukherjee had projected the

economy to grow by 7.6 (+/- 0.25) per cent. The growth projection for 2012-13 was

optimistic and would have to revise in wake of the developments that have taken place during the course of the fiscal, an official said, adding "it could be between 5.7 to 6 per cent".

Reliance Comm. Profit plunges on finance costs

Consolidated net profit at the country's No.3 mobile phone carrier by customers fell to 1.02

billion rupees for its financial second quarter through September from 2.52 billion a year

earlier.

5

International News

Sailabala Nayak [I MBA I]

Global Market struggle to make gains on debt crisis worries

World share MARKETS struggled to make gains on 14th November 2012 as investors fretted about rising tensions in Europe over its debt crisis and the fast-approaching fiscal cliff in the

United States. A wave of strikes across southern Europe to protest against spending cuts and

tax hikes kept the focus firmly on the region's debt crisis as policymakers wrangle over a deal to release desperately needed funds for Greece.

The MSCI world equity index was little changed around 321.90 points as losses across

European markets were offset by a 0.4 percent rise in Asian markets outside Japan as they recovered from seven-week lows hit. The FTSEurofirst 300 index of top European shares was

down around 0.4 percent at 1,094.95 points by 10:30 GMT, giving up 0.4 percent rise, its first

daily gain in four sessions.

BBC must reform, says trust chairman Patten Britain's BBC could be doomed unless it makes radical changes, the head of its governing

trust said, after its director general quit taking the blame for the airing of false child sex abuse

allegations against a former politician.

Chris Patten, chairman of the BBC Trust, said confidence had to be restored if the publicly

funded corporation was to withstand pressure from rivals, especially Rupert Murdoch's media

empire, which would try to take advantage of the turmoil.

China Slams ‘distorted’ view of copyright piracy problem China's top official in charge of fighting copyright piracy slammed what he said was

deliberate distortion of the problem by the Western media caused by the country's poor global

image, saying important facts had been ignored.

Foreign governments, including the United States, have for years urged China to take a

stronger stand against pervasive violations of intellectual property rights on products ranging

from medicines to software to DVD movies sold on the street.

China, India economies set to dwarf G7 before long: OECD

China's economy is likely to overtake the euro zone's this year, India is leapfrogging Japan and by 2030 the Asian pair will be bigger than the United States, euro area and Japan

combined, the OECD said on Friday.

In a crystal-ball exercise to tease out long-term trends in the global economy, the

Organisation for Economic Cooperation and Development said the combined gross domestic

product of China and India was likely to exceed that of all the current Group of Seven rich economies by around 2025.Their output in 2010 was less than half the G7's GDP. The

projections of the Paris-based OECD, a club of industrial democracies, are based on 2005

purchasing power parities (PPP). At market exchange rates, it will take emerging markets a

bit longer to seize the crown - for example, Goldman Sachs reckons the BRICs quartet of Brazil, Russia, India and China will overtake the G7 by 2037.

6

Europe seeks to break log jam over regime to control banks

EU finance ministers sought to break an impasse over a new regime to supervise banks, but

with much of the plan contested, the European Union risks seeing this centerpiece reform

unravel.

So far, countries in the euro zone have attempted to contain the financial crisis with

piecemeal measures. The banking union is a cornerstone of wider economic union and the first concerted attempt to integrate the bloc's response to problem lenders to win back

confidence. Finance ministers from the bloc's 27 countries met in Brussels to attempt to

advance talks on divisive questions such as the scope of the European Central Bank's cross-border supervisory powers, which would be a first step in a banking union.

IMF's Lagarde wants "real fix" for Greece as slowdown spreads Greece needs a lasting solution to its debt burden to avoid a prolonged crisis as Europe's

slowdown and U.S. fiscal problems dampen the economic outlook in Asia, International

Monetary Fund Managing Director Christine Lagarde said .

The IMF expects a "real fix" for Greece that puts its debt on a sustainable path as quickly as

possible, Lagarde said, showing no signs of backing down in a clash with the EU over how Athens can bring its debt down to a sustainable level.

Euro zone finance ministers have suggested Greece, where the euro zone debt crisis began,

should be given until 2022 to lower its debt to gross domestic product (GDP) ratio to 120 percent, but Lagarde has insisted the existing target of 2020 should remain, in an unusually

public airing of disagreement.

FII Position on SGX Nifty Outpaces That on NSE

Foreign institutional investor exposure to Nifty futures traded on the Singapore Exchange

(SGX) hit a record high last month overtaking volumes on the NSE this year, and highlighting the continued export of India's financial markets amid relative ease of doing

business and greater offshore regulatory clarity. The average daily value of FIIs' open interest

(OI), or outstanding positions on Nifty futures traded on the SGX, was `21,700 crore against

`14,600 crore on the NSE in October.

Indian FMPs turn out a big draw for overseas investors

Fixed maturity plans (FMPs) may have lost some of their charm among domestic investors,

but these are a big hit among foreign investors, mainly from Europe, the US and the Gulf.

Foreign investors find Indian FMPs attractive because of the marginally high returns over

similar range of international fixed income products.

7

Rates

Pankaj Sharma [II MBA J]

Repo Rate 8.00%

Reverse Repo 7.00%

Call rate 7.00%-8.10% Inflation 7.45% for October 2012

Forex Reserve $293.559 Billion as on 9th November, 2012

91day T-Bill 8.1857% IIP -0.4% for September 2012

7.45 GS 2017 8.1625%

Graphs

Pankaj Sharma [II MBA J]

52

52.5

53

53.5

54

54.5

55

1-Nov 4-Nov 7-Nov 10-Nov 13-Nov

Rs/$

Rs/$

30000

30400

30800

31200

31600

32000

1-Nov 4-Nov 7-Nov 10-Nov 13-Nov

Gold(per 10 gram)

Gold(per 10 gram)

8

102

105

108

111

114

1-Nov 4-Nov 7-Nov 10-Nov 13-Nov

Oil(per bbl)

Oil(per bbl)

1000000

1100000

1200000

1300000

1400000

1500000

5000

5200

5400

5600

5800

6000

1-Nov 4-Nov 7-Nov 10-Nov 13-Nov

future rates open interest

5000

5200

5400

5600

5800

6000

17,900.00

18,300.00

18,700.00

19,100.00

19,500.00

19,900.00

01-Nov 04-Nov 07-Nov 10-Nov 13-Nov

sensex nifty

9

Fiscal Cliff: What Does it Mean for India?

Eldho Poulose [I MBA K]

Ben Bernanke, Chairman of US Federal Reserve, showcased the metaphor ‗Fiscal Cliff‘ which is driving the U.S. economy in to turbulence followed by the Presidential election.

Fiscal cliff implies a series of tax hikes along with axing of government spending which will

affects the U.S economy‘s growth. It is estimated that these tax increase and spending cuts

have to be implemented by the starting of 2013, if the government is not adept of making changes into several existing rules and legislation.

Economic Policy Institute, Washington, estimates an impact of $732 billion with several tax and spending measures which will have an impact on the living standard of the people. It

includes expiration of the Bush tax cuts of $202 billion. Across-the-board spending cuts of

$128 billion, expiration of payroll tax cut of $115 billion, expiration of extended unemployment benefits of $39 billion, expansion of the Alternative Minimum Tax of $114

billion, expiration of miscellaneous tax provisions of $120 billion and mandated cuts in

Medicare reimbursement of $14 billion.

This is the scenario in US, which can portray its impact on the global economy.IMF

Managing Director Christine Lagarde mentioned that "If expiring tax provisions and

spending cuts were indeed to come into play, growth in the United States would fall to zero or below—and the rest of the world will not be immune". On these grounds IMF urged the

US Officials to avoid the ‗Fiscal Cliff‘ in order to avoid uncertainties at global level.

Lots of discussions are on regarding what will be the impact of ‗Fiscal Cliff‘ on Indian economy. Obviously, it is going to have an impact on the markets, corporate and economy of

India. The glimpse of ‗Fiscal Cliff‘ was already reflected in the Indian markets when both

Sensex and Nifty were pulled down. The weakening of INR can accelerate the exporters, but paradoxically if the ‗Fiscal cliff‘ turns out to a recession in U.S, the exporters are going to

have bitter experience.

In the view of Indranil Sen Gupta of Bank of America Merrill Lynch, the handling of ‗Fiscal

Cliff‘ by the U.S Government will get reflected in the growth rate of Indian economy in FY

2014. As per his projections India‘s growth rate will be around 6.9% if Obama succeed in

fixing it by the mid of 2013. Also Finance Minister P. Chidambaram during IMF meet in Tokyo mentioned that ―the issues of fiscal cliff and the lifting of the debt ceiling in the U.S.

also need to be resolved‖ which shows India‘s concern on the issue. It is very important for

India for the phenomena of ‗Fiscal Cliff‘ to get solved as early as possible because the exports and foreign investment has got positive correlation with the India‘s economic growth.

Most of the experts and analyst are hopeful that the issue is likely be resolved and is not going to have an impact on global economy in long run.

Sources:

http://articles.economictimes.indiatimes.com/2012-11-16/news/35155102_1_fiscal-cliff-indian-

economy-indian-market

http://www.thehindu.com/opinion/op-ed/the-american-fiscal-cliff-and-india/article4074878.ece

http://www.marketoracle.co.uk/Article37578.html

10

Remedy for Too-Big-To-Fail Institutions?

Dhruv Chopra [II MBA I]

The Vickers Commission in the United Kingdom has advocated ring fencing of core banking activities and on the other hand The Volcker Rule in the United States prohibits banks from

engaging in certain kind of investment activities. These rules and regulations have come to

fore after the loop holes in the banking sector were magnified during the sub-prime crises and

the consensus on the implementation of these rules is still debatable. In the Vickers Commission, core activities of the bank like taking deposits from and making loans to

individuals and small and medium sized organization would be ―ring-fenced‖. Some

activities like trading, purchase of loans and securities, transactions outside the European Economic Area and with non ring-fenced banks would be prohibited. It is also stated that the

ring-fenced entity would require more capital than advocated by the Basel 3 committee.

The Volker Rule attempts to limit banks‘ exposure in certain investment activities like in

hedge funds and private equity. Proprietary trading, which is banks trading on their own

account is completely banned. Demise of Lehman Brothers and Bear Stearns is because of

these trading acts. The Glass- Steagall Act that was repealed in 1999 had the rationale of keeping the investment banking separate from the commercial banking activity and now the

new founded acts and rules are trying to advocate the same thought which was envisaged by

Glass and Steagall long ago.

Sandy Weill, the former chairman of the Citigroup advocates the return of Glass-Steagall Act

altogether and there are many academicians who are carrying Sandy‘s point of view forward

too. But the question here arises that by demarcating the commercial and investment activity of the bank can the big institutions survive? In today‘s time where the customers don‘t have

much time to spare on different investment instruments to choose from and want everything

on a single platter in a quick and organized manner, a simple commercial bank became a universal bank by providing one shop investment solutions coupled with core banking to

retain their customers.

But has this opportunity been over utilized by the bankers and has put on stake the security of

investors‘ money? But what can be the solution to this dilemma? Limiting the scope of the

banks and raising the capital requirement won‘t answer these questions appropriately.

Multiple approaches are required to unearth the solution to these issues. Mr. Raghuram Rajan, CEA to GOI, advocates that setting limits on all trading assets or income can help the

big institutions to be in the limits and so they can also manage the risk properly. Mr. TT Ram

Mohan of IIM-A states that the problem is not the scope of activities carried out by the banks but the sheer bigness of these institutions that pose a challenge. If the size of bank‘s asset to

GDP is controlled and looked carefully upon then the risk can be mitigated in a better way.

Though many solutions by the eminent leaders of the world are advocated and discussed

upon but the lag in adoption and implementation of certain rules and regulations can again

pose a challenge for the financial sector because of the paucity of time and the anemic growth

which the world is witnessing. Acting fast and shielding the global economy from another financial headwind is the only solution.

Source:

Investopedia: Glass-Steagall Act

―How do we resolve the Too big to fail problem?‖ by Mr. TT Ram Mohan from EPW, Septem-

ber issue.

11

Alumni Speak: Mr. Anubhav Jain

Nikunj Garg [II MBA M]

Company name, Designation held

Management Trainee in Risk and Analysis, Derivatives GR&A, Crisil

What is the profile you are handling in the company?

We are supposed to analyse and generate risks/scenarios for the traders’ books of an investment bank.

What influenced your decision to choose this industry and join the particular company

How and what all did you prepare to get into this Company?

I got into this company through campus recruitments. So for the process i prepared for financial statement analysis, valuations, research methodologies and few more things.

How is your experience in the company as well as industry so far?

The experience has been very nice so far. The work culture in Crisil is amazing. It is friendly

and calm so you don’t feel any stress during work. Plus everyone around you is from

esteemed colleges of India and outside, mostly holding Chartered degrees and certifications. There is always a lot to learn from them.

How is professional world different from your life in college during your MBA?

There are new demands that work life expects from you. The attitude of “chalta hai” won’t

work in real life situation. You are accounted for every action thus you have to be a

professional during your work and non work hours.

What are the opportunities for us (juniors) in your company?

I see a lot of new opportunities posted on Crisil job portal. I think there are ample of

opportunities for everyone who have the right skill-sets and wants to be a part of the

company in the future.

Will you be willing to come and share more about the industry and the company and

your experience with us in an Alumni Interface?

Yes given an opportunity and provided that I m in the city, I would definitely come and share

my experiences with everyone.

What certifications you will recommend to us to get an edge over others?

If you want to pursue any such courses and certifications I would suggest for CFA or FRM.

Any message for Christites?

Yes, Christ is a very good Brand that we have got attached with. Make use of it. The faculty we are provided in Christ is very good. Learn as much as you can from them because I think

this is the best time to do so in your career.

12

Should RBI Issue Banking Licenses to NBFCs?

Sabahat Bashir [I MBA I] India witnessed a rapid economic development with the introduction of Liberalisation policy in

1990s.Under this policy, banking licenses were issued to many small private banks like HDFC, ICICI,

Axis bank etc. Despite of all the improvements and developments a majority of our population is still

deprived of various banking benefits or rather unaware of banking technology. After almost 20 years,

the banking industry is once again proposed to issue banking licenses; a decision that follows the global financial imbroglio witnessed since 2008. RBI is also decided to provide banking licenses to

viable NBFCs.

The existing expertise and the niche operations of NBFCs make them a desirable choice for

prospective banks in the country. Since NBFCs are already regulated under RBI, their conversion into

banks will not be difficult. Microfinance, an important economy driver, could be better addressed if

NBFCs specializing in the specified sectors can better leverage their competence by converting to

banks and having access to low-cost funds. Moreover NBFCs offer various advantages they offer like:

NBFCs play a crucial role in innovation challenges pertaining to Infrastructure finance,

Agricultural finance, SMEs etc.

They offer easy access to credit for semi-rural and rural parts of India where the reach of other

banks is insufficient.

They also render the benefits of local presence and strong customer relationships.

NBFCs have a robust business model and provide cheap fund facility which is sometimes

beyond the credit appraisals of other banks.

A number of companies like Bajaj, Aditya Birla Financial Services, Reliance Capital, Indiabulls,

Mahindra and Mahindra etc have already expressed interest in obtaining banking licenses for their

NBFC wings. Now it is upto the discretion of RBI to key out the benefits by issuing banking licenses

to the NBFCs and witnessing a new direction in economic growth of the country.

But there are concerns about selecting NBFCs as an option to convert them into banks. First of all, the

performance of the financial ratios like RoA (Return on Assets) and RoE ( Return on Equity) as

the returns of banks are much lower than those of NBFCs. For instance, M&M Finance earns 4.5

percent on its assets and about 24 percent on equity. The best private bank, in contrast, earns just 1.6

percent on its assets and less than 20 percent on equity. Additionally the requirements to comply with

the regulations of the banking system will be a herculean task in the short term. Reasons like financial inclusion low returns on the investment will reap benefits to the players only after a few years. NBFCs

have significantly focussed on profits and margins much higher than that of banks. Mark Sanbom said

that ‗Your success in life isn't based on your ability to simply change. It is based on your ability to

change faster than your competition, customers and business‘. Thus, NBFCs that will be selected in

future have to adopt the mechanisms of the industry at a healthy pace.

At present the banking system is still struggling with the global crisis, especially its heavy influence on

the determination of monetary rates by RBI. Such increase is also squeezing the interest rate spread

that banks‘ margins are dependent on. The increasing competition could undermine systemic liability

and fiscal populism, high fiscal deficit and short term oriented financial markets pose additional

challenges for banks.

Sources:

http://www.iba.org.in/events/ficci-sep10.pdf

http://www.rbi.org.in/scripts/PublicationsView.aspx?id=9795

http://www.bankbazaar.com/guide/banks-in-india

http://www.firstpost.com/business/lt-fin-shriram-and-mm-lead-banking-licence-race-73781.html

http://www.indianexpress.com/news/rbi-against-bank-licences-for-corporates/979474

13

PowerGrid Corporation of India Limited

Deebadwita De [II MBA J] and Shashank Mishra [II MBA N]

PowerGrid Corporation of India Limited (powergrid), the Central Transmission

Utility (CTU), is engaged in Bulk Power transmission. Its responsibility includes

planning, coordination, supervision and control over inter-State transmission system

and operation of National & Regional Power Grids.

Company owns and operates about 96,216ckt kms of transmission lines at

800/765kV, 400kV, 220kV & 132kV EHVAC & +500kV HVDC levels and 158

sub-stations with transformation capacity of about 1,51,303 MVA as on 30th

September 2012. This gigantic transmission network, spread over length and breadth

of the country, is consistently maintained at an availability of over 99%.

POWERGRID was incorporated in 1989 and based on its impeccable performance,

Govt. Of India categorised it as the Miniratna Category–I PSU w.e.f. Oct‘98.

Further, recognizing the role of POWERGRID in the overall development of Indian

power sector ―Navratna status‖ was conferred to POWERGRID.

Power Grid (PWG) is a monopoly play in the regulated transmission business in India

and its one of the better managed PSUs. The company is in a regulated business

which assures minimum 15.5% ROE; guarantees reasonable profitability along with

steady returns. Power Grid has also consistently maintained average system

availability above 99.94% at par with the International utilities, thus leading to higher

income under the incentive based tariff structure.

Key Highlights:

Power Grid Corporation‘s net profit has increase by 58.9 percent for the

September quarter at `1125.9 crore v/s `708.7 crore in the same quarter last

year.

Total income of PGCIL has also increased significantly by 31.9 per cent to

`3242.8 crore during July-Sept quarter 2012, as against the total income of

`2458.6 crore earned during the year-ago period.

The revenue of PGCIL have grown by `31bn which is a 40% yoy growth.

14

Key Developments in the stock:

Power Grid plans a capital expenditure of `100,000 crore in the XII th five

year plan period that started this April.

When the power generating companies are facing severe burden of

under-recoveries , low tariffs, the state-owned transmission utility PCGIL has

come out with excellent results.

The company is in a regulated business which assures minimum 15.5% ROE.

95% revenue of PGCIL comes from transmission but they are trying to

diversify in other sector also such as Consultancy for T&D projects.

They have order book of worth `100bn EPC contracts.

Two UMPPs (Sasan and Mundra) to be commissioned in FY 2012-13.

Price movement of PGCIL suggests that there is a possible upward move in the

stock.

Key Financial Ratios:

15

16

Source: www.indiainfoline.com

Recommendation for the stock:

Power Grid has a monopoly play in the regulated transmission business in India and its one of

the better managed PSUs. At current levels, the valuations look attractive. Power Grid has a

strong hold in the transmission business which will help in growing further. The

recommendation for the stock is ―BUY‖ for a period of 10 months with a target of `150.

Call: Buy

CMP: `115

Target Price : `150

Time Period: 10 months

17

Rice

Srinivas Prasad K [II MBA J]

Rice is a staple for a large part of the world's human population, especially in East and Southeast Asia,

making it the most consumed cereal grain. Rice is the world's third largest crop, behind maize (corn)

and wheat. Rice cultivation is well suited to countries and regions with low labour costs and high rainfall, as it is very labour-intensive to cultivate and requires plenty of water for irrigation. However,

it can be grown practically anywhere, even on steep hillsides. Although its species are native to South

Asia and certain parts of Africa, centuries of trade and exportation have made it commonplace in many

cultures.

Rice cultivation is considered to have begun simultaneously in many countries over 6500 years ago.

Two species of rice were domesticated, Asian rice (Oryza sativa) and African rice. Throughout history

rice has been one of man's most important foods. Archeological evidence suggests that rice has been

feeding mankind for more than 5,000 years. Today, this unique grain helps sustain 2/3rd of the world's

popu l a t i on . …………………………………………………………………………………………. . .

World production of rice has risen steadily from about 200 million tons of paddy rice in 1960 to 700

million tons in 2006. Milled rice is about 68% of paddy rice by weight. In the year 2004, the top three

producers were China (31% of world production), India (20%), and Indonesia (9%). India accounts for

more than 75 percent of global trade. Japonica rice accounts for around 12 percent of global rice trade,

followed by Basmati rice that accounts for around 10 percent and Glutinous rice for most of the

remainder.

The major rice growing areas in India are West Bengal, Uttar Pradesh, Madhya Pradesh, Orissa, Bihar,

Andhra Pradesh, Assam, Tamil Nadu, Punjab, Maharashtra, Karnataka, Haryana, Gujarat, Kerala,

Jammu- Kashmir, Tripura, Meghalaya, Manipur, Rajasthan, Nagaland, Arunachal Pradesh, Himachal

Pradesh, Mizoram, Goa, Pondicherry, Sikkim, Andaman & Nicobar Island and Dadra & Nagar Haveli.

Indian rice cultivars include long-grained and aromatic Basmati (grown in the North), long and

medium-grained Patna rice and short-grained Masoori. In South India the most prized cultivar is

'ponni' which is primarily grown in the delta regions of Kaveri River. Kaveri is also referred to as

ponni in the South and the name reflects the geographic region where it is grown. Rice in East India

and South India, is usually prepared by boiling the rice in large pans immediately after harvesting and

before removing the husk; this is referred to in English as parboiled rice. It is then dried, and the husk

removed later. It often displays small red speckles, and has a smoky flavour from the fires.

Current performance in the commodity market

Good domestic demand, coupled with fresh trade enquires, kept aromatic and non-basmati rice firm for

second week of November. After witnessing a good rally last week. Increased demand in the retail

market, led the prices to rule around Rs 5,700 a quintal for Pusa-1121 (steam), while Pusa-1121 (sela)

sold at Rs 4,800. Pure basmati (raw) quoted at `5,950-6,000 while pure basmati (sela) sold at `5,000-

5,100. Duplicate basmati (steam) traded at `4,750-4,800. Sharbati (steam) quoted at `3,700 while

Sharbati (sela) quoted at `3,300. About 60,000 bags of PR variety arrived and sold for `1,100-1,280 a

quintal, Sharbati stocks of around 15,000 bags quoted at `1,600-1,770 while 6,000 bags of DB variety

sold at `2,230-2,480. About 35,000 bags of Pusa-1121 quoted at `2,100-2,500, pure basmati paddy

4,000 bags sold at `2,700-2,900.

Source:

http://www.thehindubusinessline.com/markets/commodities/new-trade-enquiries-keep-rice-firm/

article4091196.ece

http://www.commodityonline.com/commodities/cereal/rice.php

18

The UP Rice Scam

Ankita Pagaria [II MBA J]

A `2,500 crore (about $453 million) rice scam going back to 2007, involving top

ministers and officials in India and abroad, has resurfaced in India after four years,

according to local sources, but is going largely unnoticed by both politicians and the

media.

According to India Against Corruption, rice prices shot up from about $350 per ton to

over $1,000 per ton following the ban of non-basmati rice exports in 2007. A huge

stock of food grain meant for distribution under the Antyodaya, Annapurna and

Mid-Day Meal schemes was smuggled outside the state and even the country to

Bangladesh, Nepal and other nations. It is believed that top officials of the state as

well as the central government colluded to divert the food grain between 2001 and

2007.

The Commerce Minister allowed the exports on diplomacy grounds instead of

allotting the task to government export and shipping agencies, he allowed a few

private companies to circumvent the ban and sell rice directly. It is estimated that the

private companies made profits of around `2,500 crore (about $450 million) by

selling rice at the elevated prices.

The court observed that there was prima facie no doubt that the food grains meant for

poor had been smuggled into the open market and also into the neighboring

countries and none of that could have happened without the involvement of higher

authorities. Also that transportation by goods trains to far off corners of the country

indicated that smuggling happened in collusion with authorities.

The scam was reported in Uttar Pradesh between 2003-2007, the period when

Samajwadi Party leader Mulayam Singh Yadev was the chief minister of the UP. The

scam involves over 200 state and central government officials. It was a scam that

stretched to almost 7 years and 300 FIRs. Later in 2010, the government admitted to

flaws in the process and blacklisted the companies involved in the trade. However,

nothing significant was done to the ministers involved.

Source:

http://www.commodityonline.com/news/indias-latest-rice-scam-involves-rs-200000-crore-

34255-3-34256.html

http://oryza.com/Rice-News/15361.html

19

Did You Know?

Vinay Goel [II MBA L]

IS PLATINUM A BETTER INVESTMENT OPTION THAN GOLD?

Platinum is an equally precious metal as compared to gold. Nowadays its price is very

much close to the gold. On November 7 Platinum traded at `3256 per gram and gold

at `3134 per gram. The prices on October 24 were `3062 and `3178

respectively. Even though the price of platinum is lower than the gold it is the most

favorable time to buy the same as per Bombay Bullion association. Earlier the prices

of platinum used to hover around 150 times that of gold but the scenario has been

changed over the last 5 years. Many experts believe that the situation will

continue for the next coming years. Moreover the constant hike in gold prices is the

major factor which is leading to switch other investment options.

With the emerging crisis in the Euro zone and downgrading of US long term debt was

the contributing factor towards the increasing narrowing of gaps between the precious

metals. Such situation arise even when Platinum is 30 times rarer than gold.

Platinum‘s thinly traded market makes it more susceptible erratic moves caused due

to recessionary conditions.

Major reasons for low investments in Platinum in India are given below:

Past traditions which considers gold as the best investments in times of

crisis.

Platinum is silver in color similar to silver.

It is considered as a premium metal because of its low availability.

The fact that platinum is on par with gold now itself is proof that people are

buying gold in these times of crisis, and not platinum.

Sources:

http://trak.in/tags/business/2011/09/07/precious-metals-gold-silver-platinum/

http://articles.economictimes.indiatimes.com/2011-08-28/news/29935853_1_world-gold-

council-love-gold-demand-for-gold-bars

20

Crossword

Reddy Sreedhar T [II MBA L]

Across

4. This council is the

final authority to

approve 5 year plans of

India - 'National .........

council'

5. Jeet Thayil, an Indian

author was recently

nominated for 'Man

Booker Prize 2012' for

his novel...

7. The Government

recently Formed a

Committee to examine

Taxation policies for IT

Sector. This Committee

is headed by 'N. ....'

8. SEBI has recently

launched this portal to

enable investors to

lodge and follow up complaints they may have. It is named as...

9. This Indian company recently rated as second largest outsourcing firm in the

world by IOAP (International Association of outstanding professionals)

Down

1. RBI was set up in 1935 after recommendations from this high powered

commission..

2. First financial supermarket in India has been recently started in this city.

3. India's finance budget is presented every year on last working day of this month.

6. Khan commission submitted its report about this financial aspect and the

recommendations of the commission were incorporated in the mid-term policy

review of 2005-06 - 'Financial .......'

9. India recently lent $ 149 mn to this under-debt Euro zone country

21

Kritika Banerjee

Editor

Sanjeet Kumar

News

Reddy Sreedhar T

Crosswords & Quiz

Pankaj Sharma

Graph & Rates

Arnab Basak

Investors check

Bhavesh Dhanesha &

Rohit Munka

Debate

Vinay Goel

Did You Know

Nikunj Garg

Alumni Speak

Dhruv Chopra

Contemporary Articles

Ankita Pagaria

Scams

Srinivas Prasad K

Commodity Market

Debadwita De &

Shashank Mishra

Stock Watch

Prachi Sharda

Buzz Words

Vedang Dave &

Sandeep Kumar

Boyapati

Review Committee

Kritika Banerjee

Creative Head &

Design

Team Members

22

About Us

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