Indian Infrastructural Growth stalls : shows Data

Index of Eight Core Industries (Base: 2004-05=100)  September 2011

1.         The summarized Index of Eight Core Industries with 2004-05 base is given at the Annexure. 2.         The Index of Eight core industries having a combined weight of 37.90 per cent in the Index of Industrial Production (IIP) stood at 131.50 in September 2011 with a growth rate of 2.3% compared to its growth at 3.3% in September 2010.  During April-September 2011-12, the cumulative growth rate of the Core industries was 4.9% as against their growth at 5.6% during the corresponding period in 2010-11. Coal 3.         Coal production (weight: 4.38%) registered a growth of (-) 17.8% in September 2011 compared to its growth at (-) 1.8% in September 2010. Coal production grew by (-) 4.8% during April-September 2011-12 compared to its growth at 0.2% during the same period of 2010-11.  Crude Oil 4.         Crude Oil production (weight: 5.22%) registered a growth of 0.1 % in September 2011 compared to its growth at 12.5% in September 2010. Crude Oil production registered a growth of 5.1% during April-September 2011-12 compared to its growth at 10.2% during the same period of 2010-11. Natural Gas 5.         Natural Gas production (weight: 1.71%) registered a growth of (-) 6.4% in September 2011 compared to its growth at 12.6% in September 2010. Natural Gas production registered a growth of (-) 8.5% during April-September 2011-12 compared to its growth at 25.2% during the same period of 2010-11. Petroleum Refinery Products 6.         Petroleum refinery production (weight: 5.94%) had a growth of 4.4% in September 2011 compared to its growth at (-) 10.2% in September 2010.  Petroleum refinery production registered a growth of 4.7% during April-September 2011-12 compared to its 2.6% growth during the same period of 2010-11. Fertilizers 7.         Fertilizer production (weight: 1.25%) registered a growth of (-) 2.1)% in September 2011 against its growth at 0.3% inSeptember 2010.Fertilizer production grew by 0.6% during April-September 2011-12 compared to its growth at  (-) 2.3% during the same period of 2010-11.  Steel (Alloy + Non-Alloy) 8.         Steel production (weight: 6.68%) had a growth rate of 6.6% in September 2011 against its 11.7% growth in September2010. Steel production grew by 9.5% during April-September 2011-12 compared to its growth at 7.4% during the same period of 2010-11. Cement 9.         Cement production (weight: 2.41%) registered a growth of 0.9% in September 2011 against its 5.2% growth inSeptember 2010. Cement Production grew by 2.5% during April-September 2011-12 compared to its growth at 4.7% during the same period of 2010-11. Electricity 10.       Electricity generation (weight: 10.32%) had a 8.9% growth in September 2011 compared to its 2.1% growth inSeptember 2010. Electricity generation grew by 9.3% during April-September 2011-12 as against its 4.1% growth during the same period of 2010-11.

Indian Government notification: Infrastructure Bonds for FII

Ministry of Finance12-September, 2011 19:30 IST

FII Investment in Long-Term Corporate Debt in Infrastructure Sector Liberalized

Following the announcement by the Union Finance Minister Shri Pranab Mukherjee in his budget 2011-12, the Government in consultation with the regulators had raised the limit for FII investment in long-term corporate bonds issued by the companies in the infrastructure sector from USD 5 billion to USD 25 billion. This scheme was operationalised vide SEBI circular CIR/IMD/FIIC/5/2011 dated 31st March 2011. As per the SEBI circular, investments under this scheme were allowed in listed and unlisted bonds that had a minimum residual maturity of five years and these investments were subject to a minimum lock-in period of three years. The scheme was conceived and operationalized to open new channels of funding for the infrastructure sector while deepening the corporate bond market. The Government has been monitoring FIIs subscription under the scheme. It was observed that additional steps would have to be taken to increase the level of subscription by FIIs. As on 31st August 2011, against a ceiling limit of USD 25 billion or Rs 1,12,095 crores, investments by FIIs under this scheme were only USD 109 Million or Rs 500 crores. In view of this, consultations were held with stakeholders on the issue. It was concluded that the three-year lock-in period and doubts regarding the interpretation of the requirement of residual maturity of five years were discouraging FIIs from investing in this scheme. Therefore, in order to make this scheme attractive to FIIs, the scheme has been modified in consultation with RBI and SEBI. The scheme would now have the following features. a. As per SEBI circular CIR/IMD/DF/14/2011 dated August 09, 2011 Qualified Foreign Investors (QFIs) were permitted to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of USD 3 billion within the existing ceiling of USD 25 billion. b. It has now been decided to carve out USD 5 billion out of the remaining USD 22 billion for FII investments in Long-term infra bonds. FIIs can now invest in long-term infra bonds, subject to the above USD 5 billion limit, in bonds which have an initial maturity of five years or more at the time of issue and residual maturity of one year at the time of first purchase by FIIs. These investments are subject to a lock-in period of one year. FIIs can, however, trade amongst themselves but cannot sell to domestic investors during the lock-in period of one year. c. The remaining USD 17 billion limit available to FIIs can be invested in Long-term infra bonds which have an initial maturity of five years or more at the time of issue and residual maturity of three years at the time of first purchase by FIIs. These investments are subject to a lock-in period of three years. During the three-year lock-in period FIIs can trade amongst themselves but cannot sell to domestic investors. SEBI is expected to issue notifications incorporating the above changes in the scheme by 15th October 2011. DSM/SS/GN (Release ID :75912)

INFRASTRUCTURE DEBT FUND SCHEMES by SEBI

“CHAPTER VI -B
INFRASTRUCTURE DEBT FUND SCHEMES
Definitions
49L. For the purposes of this Chapter, unless the context otherwise requires-
(1) “Infrastructure debt fund scheme” means a mutual fund scheme that invests primarily (minimum 90% of scheme assets) in the debt securities or securitized debt instrument of infrastructure companies or infrastructure capital companies or infrastructure projects or special purpose vehicles which are created for the purpose of facilitating or promoting investment in infrastructure, and other permissible assets in accordance with these regulations or bank loans in respect of completed and revenue generating projects of infrastructure companies or projects or special purpose vehicles.
(2) “Infrastructure” includes the sectors as specified by guidelines issued by the Board or as notified by Ministry of Finance, from time to time.
(3) ‘Strategic Investor’ means;
(i) an Infrastructure Finance Company registered with Reserve bank of India as Non Banking Financial Company;
(ii) a Scheduled Commercial Bank;
(iii) International Multilateral Financial Institution.
49M. Applicability
(1) The provisions of this chapter shall apply to infrastructure debt fund schemes launched by mutual funds.
(2) All other provisions of these regulations and the guidelines and circulars issued thereunder, unless the context otherwise require or repugnant to the provisions of this chapter, shall apply to infrastructure debt fund schemes, trustees and asset management companies in relation to such schemes.
49N. Eligibility criteria for launching infrastructure debt fund scheme
(1) An existing mutual fund may launch an infrastructure debt fund schemes if it has an adequate number of key personnel having adequate experience in infrastructure sector.
(2) A certificate of registration may be granted under regulation 9 to an applicant proposing to launch only infrastructure debt fund schemes if the sponsor or the parent company of the sponsor: -
(a) has been carrying on activities or business in infrastructure financing sector for a period of not less than five years;
(b) fulfills eligibility criteria provided in Regulation 7.
Explanation- For the purpose of this clause, ‘parent company of the sponsor’ shall mean a company which holds at least 75% of paid up equity share capital of the sponsor.
49O. Conditions for infrastructure debt fund schemes
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(1) An infrastructure debt fund scheme shall be launched either as close-ended scheme maturing after more than five years or interval scheme with lock-in of five years and interval period not longer than one month as may be specified in the scheme information document.
(2) Units of infrastructure debt fund schemes shall be listed on a recognized stock exchange, provided that such units shall be listed only after being fully paid up.
(3) Mutual Funds may disclose indicative portfolio of infrastructure debt fund scheme to its potential investors disclosing the type of assets the mutual fund will be investing.
(4) An infrastructure debt fund scheme shall have minimum five investors and no single investor shall hold more than fifty percent of net assets of the scheme.
(5) No infrastructure debt fund scheme shall accept any investment from any investor which is less than Rupees one crore.
(6) The minimum size of the unit shall be Rupees ten lakhs.
(7) Each scheme launched as infrastructure debt fund scheme shall have firm commitment from the strategic investors for contribution of an amount of at least Rupees twenty five crores before the allotment of units of the scheme are marketed to other potential investors.
(8) Mutual Funds launching infrastructure debt fund scheme may issue partly paid units to the investors, subject to following conditions:
(a) The asset management company shall call for the unpaid portions depending upon the deployment opportunities;
(b) The offer document of the scheme shall disclose the interest or penalty which may be deducted in case of non payment of call money by the investors within stipulated time; and
(c) The amount of interest or penalty shall be retained in the scheme.
49P. Permissible investments
(1) Every infrastructure debt fund scheme shall invest at least ninety percent of the net assets of the scheme in the debt securities or securitized debt instruments of infrastructure companies or projects or special purpose vehicles which are created for the purpose of facilitating or promoting investment in infrastructure or bank loans in respect of completed and revenue generating projects of infrastructure companies or special purpose vehicle.
(2) Subject to sub-regulation (1), every infrastructure debt fund scheme may invest the balance amount in equity shares, convertibles including mezzanine financing instruments of companies engaged in infrastructure, infrastructure development projects, whether listed on a recognized stock exchange in India or not; or money market instruments and bank deposits.
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(3) The investment restrictions shall be applicable on the life-cycle of the infrastructure debt fund scheme and shall be reckoned with reference to the total amount raised by the infrastructure debt fund scheme.
(4) No mutual fund shall, under all its infrastructure debt fund schemes, invest more than thirty per cent of its net assets in the debt securities or assets of any single infrastructure company or project or special purpose vehicles which are created for the purpose of facilitating or promoting investment in infrastructure or bank loans in respect of completed and revenue generating projects of any single infrastructure company or project or special purpose vehicle.
(5) An infrastructure debt scheme shall not invest more than 30% of the net assets of the scheme in debt instruments or assets of any single infrastructure company or project or special purpose vehicles which are created for the purpose of facilitating or promoting investment in infrastructure or bank loans in respect of completed and revenue generating projects of any single infrastructure company or project or special purpose vehicle, which are rated below investment grade or unrated:
Provided that such investment limit may be extended upto 50% of the net assets of the scheme with the prior approval of the board of trustees and the board of asset management company.
(6) No infrastructure debt fund scheme shall invest in –
(i) Any unlisted security of the sponsor or its associate or group company;
(ii) Any listed security issued by way of preferential allotment by the sponsor or its associate or group company;
(iii) Any listed security of the sponsor or its associate or group company or bank loan in respect of completed and revenue generating projects of infrastructure companies or special purpose vehicles of the sponsor or its associate or group companies, in excess of twenty five per cent of the net assets of the scheme, subject to approval of trustees and full disclosures to investors for investments made within the aforesaid limits; or
(iv)Any asset or securities owned by the sponsor or asset management company or its associates, in excess of 20% of the net assets of the scheme not below investment grade, subject to approval of trustees and full disclosures to investors for investments made within the aforesaid limits.
49Q. Valuation of assets and declaration of net asset value
(1) The assets held by an infrastructure debt fund scheme shall be valued “in good faith” by the asset management company on the basis of appropriate valuation methods based on principles approved by the trustees.
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(2) The valuation shall be documented and the supporting data in respect of each security so valued shall be preserved at least for a period of five years after the expiry of the scheme.
(3) The methods used to arrive at values ‘in good faith’ shall be periodically reviewed by the Trustees and by the statutory auditor of the mutual fund.
(4) The valuation policy approved by the board of asset management company shall be disclosed in the scheme information document.
(5) The net asset value of every infrastructure debt fund scheme shall be calculated and declared atleast once in each quarter.
49R. Duties of asset management company
(1) The asset management company shall lay down an adequate system of internal controls and risk management.
(2) The asset management company shall exercise due diligence in maintenance of the assets of an infrastructure debt fund scheme and shall ensure that there is no avoidable deterioration in their value.
(3) The asset management company shall record in writing, the details of its decision making process in buying or selling infrastructure companies’ assets together with the justifications for such decisions and forward the same periodically to trustees.
(4) The asset management company shall ensure that investment of funds of the Infrastructure Debt Fund schemes is not made contrary to provisions of this chapter and the trust deed.
(5) The asset management company shall obtain, wherever required under these regulations, prior in-principle approval from the recognized stock exchange(s) where units are proposed to be listed.
(6) The asset management company shall institute such mechanisms as to ensure that proper care is taken for collection, monitoring and supervision of the debt assets by appointing a service provider having extensive experience thereof, if required.
49S. Disclosures in offer document and other disclosures
(1) The offer documents of infrastructure debt fund schemes shall contain disclosures which are adequate for investors to make informed investment decisions and such further disclosures as may be specified by the Board.
(2) The portfolio disclosures and financial results in respect of an infrastructure debt fund schemes shall contain such further disclosures as may be specified by the Board.
(3) Advertisements in respect of infrastructure debt fund schemes shall conform to such guidelines as may be specified by the Board.
49T. Transactions by employees etc.
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(1) All transactions done by the trustees or the employees or directors of the asset management company or the trustee company in the investee companies shall be disclosed by them to the compliance officer within one month of the transaction.
(2) The compliance officer shall make a report thereon from the view point of possible conflict of interest and shall submit it to the trustees with his recommendations, if any.
(3) The persons covered in sub-regulation (1) may obtain the views of the trustees before entering into the transaction in investee companies, by making a suitable request to them.”
(vii) in regulation 56, -
a. in sub-regulation (1), the sign of full stop “.” shall be substituted with the sign of colon “:”;
b. after sub-regulation (1), the following proviso shall be inserted, namely: -
“Provided that the scheme wise annual report or abridged summary thereof may be sent to investors in electronic form on their registered e-mail address in the manner specified by the Board.”;
c. after sub-regulation (3), the following new sub-regulation shall be inserted, namely: -
“(4) The asset management company shall display the link of the full scheme wise annual reports prominently on their website.”

Business confidence survey fall to 51.7 from 63.7: FICCI

Business confidence of India Inc. has hit a two-year low on rising cost of capital due to aggressive monetary tightening by the Reserve Bank of India (RBI) and weak domestic demand amid fears of recession in the US and some European countries, a survey reveals. 

Both global and domestic developments seem to have dented the level of confidence of India Inc., the Federation of Indian Chambers of Commerce and Industry ( FICCI) said in its latest business confidence survey. 

Overall business confidence index value declined to 51.6 during the first quarter of the current fiscal as compared to 63.7 in the January-March 2011 quarter. 

"At the domestic level, rising interest cost and weak domestic demand, both in part attributable to the contractionary monetary policy pursued by the RBI, are taking toll," the survey said. 

The RBI has hiked key policy rates 11 times since March 2010. In its latest monetary policy review last month, the RBI hiked key policy rates by 50 basis points. 

At the global level, with both the US and the Eurozone countries reeling under a fiscal crisis, there were growing apprehensions about the world economy entering into another recession, it said. 

The report said that interest rates charged from surveyed firms by their banks for both working capital loan and term loan had increased appreciably over the last six months. 

While the average interest cost for working capital loans had gone up from 11.6 percent to 13.1 percent, the average interest cost for term loans had gone up from 11.2 percent to 12.6 percent, it said. 

On the issue of impact of another round of interest rates hike on companies' near-term investment plans, 

44 percent of the respondents said it would have a "serious" impact on their investment plans,

 while 36 percent said it would have a "moderate"affect. 

The survey was conducted in July. It brings out expectations of members of corporate India for the period July-December 2011. Nearly 300 companies with turnover ranging from Rs.1 crore to Rs.250,000 crore, participated in the survey. 

The respondents, who took part in the survey, mentioned the following issues as being high on the 

Industry's agenda for improving sentiments: 

1)--  Address issues related to land acquisition expeditiously. 

2)--  Bring down the cost of credit particularly for small and medium enterprises. 

3) -- Ensure introduction of the Goods and Services Tax and Direct Tax Code from April 2012. 

4)--  Further foreign direct investment reforms in areas like insurance and multi-brand retail. 

5)--  Increase spending on the infrastructure sector as this would have a multiplier effect across sectors. 

6) -- Improve the governance framework to ensure quick policy implementation and fast-track project clearances.

Note : The issues addressed are so theoretical, in short term they are looking absurd. While Govt of India, tightening its expenditure on one side and disbursing very  high Support Prices to Farmers. So, on the One side Govt's spending is tied down towards Infra Projects, While the high Agri- produce prices continue to bake the Inflation. While, the crude has cooled off, a bit by @ 10 %, the Rupee has devalued due to fall in Equity market fall, added to Inflation and Import Prices. The Industry is yet to factor the Inflation and High Interest rates in its prices, fearing the elasticity of the demand.  

SEBI Invites Investment in Infra Bonds to F.I.I.

                                                         

     


















CIRCULAR
CIR/IMD/FIIC/15/2011                                                                                    August 26, 2011


To
All Foreign Institutional Investors
through their designated Custodians of Securities

Dear Sir/Madam


Sub: Infrastructure Finance Companies (IFCs) -- as eligible issuers for FIIs
investment limit in debt instrument for infrastructure


1. Please refer to SEBI circular dated November 26, 2010 & March 31, 2011, regarding
FII investment in the corporate bonds issued by Indian companies which are in the
infrastructure sector, where 'infrastructure' is defined in terms of the extant guidelines
on External Commercial Borrowings (ECB).

2. In partial amendment to para 3 of circular dated November 26, 2010 and para 4 of
circular dated March 31, 2011 it has been decided that Non-Banking Financial
Companies (NBFCs) categorized as Infrastructure Finance Companies (IFCs) by the
Reserve Bank of India (RBI) shall also now be considered eligible issuers for the
purposes of FII Investment under the corporate debt long term infra category.

3. This circular is issued in exercise of the powers conferred under Section 11 (1) of the
Securities and Exchange Board of India Act 1992, read with Section 10 of the
Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in
securities and to promote the development of, and to regulate the securities market.

4. A copy of this circular is available at the web page “F.I.I.” on our website
www.sebi.gov.in. The custodians are requested to bring the contents of this circular to
the notice of their FII clients.

                                                                           Jeevan Sonparote

                                                                           General Manager