FEBRUARY, 01 | 2015 | A FINNICHE INITIATIVE
In Focus
The finance club at IMT Ghaziabad is engaged in a constant endeavor to provide you with a practical exposure to the world of finance and the latest emerging trends in the related fields of Risk Management, Banking, Investments and non-finance topics.
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“Say no to cutting lending
finniche.imt@gmail.com
rates”, banks | 2
Opinion Bump in India’s GDP rate, Who is to Credit?| 4
Personality Prasoon Joshi |11
Term of Week Capital Gearing Ratio|6
Tech World WattUp |12
February, 01 | 2015 | Volume 32
India’s biggest B-School Sports event Chakravyuh’15 is a fortnight away. IMTian’s are busy forming their squad of 25 sportsmen and women. Teams are practicing with full on vigor keeping in mind the trophy of Chakravyuh and every individual planning to bag the title of Abhimanyu.
“Say no to cutting lending rates”, Banks
Bump in India’s GDP Rate, Who is to credit?
Capital Gearing Ratio
Club FinNiche releases its weekly magazine FinXpress, with the In Focus talking about the ‘Say no to cutting lending rates, Banks’. The Opinion gives an overview of ‘Bump in India’s GDP Rate, Who is to credit?’ The term of the week describes “Capital Gearing Ratio", relationship between equity financing and debt financing. Do have a look at the market section, Tech world which brings to you about Wattup: This Router can power your devices wirelessly from 15 feet away and Personality of the week, Prasoon Joshi.
Club FinNiche welcomes any comments, suggestions or criticism regarding the magazine. Please do write to us and share your ideas.
Happy Reading!
Prasoon Joshi
Regards The Editorial Team Club FinNiche
Wattup: This Router can power your devices wirelessly from 15 feet away.
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
- By Shikha Sharma
“Say no to cutting lending rates”, Banks
Banks say no room to cut lending
rates
despite
RBI's rate cut
Nationalised banks' nonperforming assets shoot up to R2,16,739 crore
Only three of the nation's 45 business banks have cut base giving rates since the Reserve Bank of India's (RBI) surprise easing, stinging the government's drive to lift business venture. Bank administrators demand they can't lower credit rates notwithstanding the authority premium rate cut on the grounds that money conditions are tight, and currency markets are minimal changed since the cut, however RBI insiders see that as more a reason to ensure net revenues. The inability to pass on the rate slice to organizations and consumers has both weakened the effect of monetary strategy and debilitated the push by the legislature to rapidly open more acknowledge and goad ventures as the economy battles to recoup from its slowest development rates subsequent to the 1980s. "We are now giving liquidity higher than what the keeping money framework requires. We don't want to build that sum," said a senior policymaker with learning of the national bank's money administration method. "Banks need to deal with their benefits and liabilities all the more proficiently," he included. Bankers say the normal finances the RBI gives the business has been consistent at around Rs 1 lakh crore ($16.2 billion) a day since the repurchase (repo) rate was sliced by
25 bps to 7.7%. The sliced rate has had little effect in money related markets, proposing a blockage in approach transmission. The interbank overnight money rate, a key measure of money conditions that has a tendency to track the repo rate, has stayed around 8% regardless of the rate cut. Moreover, three-month wholesale store rates have held almost 8.50% and the one-year wholesale store rate has climbed 10 bps to 8.60%. The Reserve Bank deals with the measure of liquidity in the business to support transmission of its rate choices. Experts don't anticipate that it will ease again in any event until after the Union Budget toward the end of February. "In the event that RBI gave somewhat more liquidity than what it is giving now, it will constrain banks to trim their base loaning rates," said CVR Rajendran, chairman and managing director at state-run Andhra Bank. Experts say the RBI will in the end need to infuse more subsidizes, despite the fact that may not as much as loan specialists need, on the off chance that it keeps facilitating money related strategy. Credit developed at a yearly rate of 10.7 % in right on time January, close decade lows, and the Narendra Modi government has been looking for lower investment rates to help start a recovery in loaning to business.
Prior in January, the RBI ordered that loan specialists change the technique used to register the base rate, or the base loaning rate, in an offer to goad all the more giving. 
Bank Of Baroda Q3 profit tanks 68%, provisions & tax hurt

ICICI Bank Q3 profit & NII rise 14%, asset quality worsens
Union Bank of India has dipped 6% to Rs. 236 in the wake of reporting a lower than anticipated net benefit at Rs. 302 crore for the second from last quarter finished December 31, 2014 (Q3), because of higher provisioning for Banks keep on suffering from decaying awful advances and representative expense. resource quality, which is compelling profit. The state-possessed loan specialist had benefit Bank of Baroda, the nation's second-greatest of Rs. 349 crore in a year prior quarter. loan specialist by resources, on Friday posted a 69 % fall in quarterly benefit because of higher As indicated by the Reserve Bank of India procurements for bad loans advances and a (RBI), its non-performing assets of nationalized surge in expense costs. banks has swelled from Rs. 9,190 crore in 201112 to Rs. 2,16,739 crore in 2013-14. India's more ICICI Bank missed road desires on Friday than two dozen state-run banks, which with the third quarter net benefit climbing 14 represent more than 70 percent of advances, percent year-on-year to Rs. 2,889 crore, helped have long been obliged by bad loans, chiefly by other salary and net premium pay. because of a log jam in the nation's monetary Nonetheless, higher provision restricted profit development in the previous two financial growth. years. This has pulled their gainfulness well beneath private-division rivals. An official at Provisions for bad loans shot up 41 percent an open division bank recognized benefit was year-on-year (up 15.4 percent consecutively) to a variable in the hesitance to lower loaning Rs 980 crore with procurement scope degree at rates yet said liquidity was a greater issue. 63.5 percent as on December 31, 2014. Resource quality was intensified amid the quarter as "There is a considerable measure of microterrible non-performing resources (NPA) administration of liquidity by RBI. Banks are expanded 35 bps year-on-year (up 28 bps taking as much time as required to cut loaning quarter-on-quarter) to 3.4 percent and net NPA rates on the grounds that we are still not rose 33 bps Y-o-Y (up 18 bps Q-o-Q) to 1.27 certain about RBI's liquidity approach," he percent. said. The BSE Sensex and Nifty fell more percent on Friday after prior hitting high for a seventh session in eight, Bank and Bank of Baroda posted results.
than 1.5 "Regularly banks are quicker in raising giving a record rates than cutting to appreciate fat premium as ICICI edges," the official included. baffling
- By Arihant Jain
On January 30, 2015, Indian government
surprised the economists by increasing the India’s fiscal deficit overshot
GDP growth in the last fiscal year from 4.7% to 6.9%. World Bank recently predicted that
the Budget Estimate of Rs 5.31
India’s GDP will surpass that of China’s by
lakh crore by December end
2017 but nobody thought that it would reach
and may prompt the Centre to
closer to that so suddenly. China’s GDP
take
the
growth rate for the 2014 calendar year was
remaining part of FY15 to
7.4%. With this increase it may even be
While calculating real GDP, a base year is the
restrict it to 4.1 per cent of
possible that India’s GDP growth rate will
year which is picked for the weights allocated
GDP. This change will certainly
outgrow the China’s GDP growth rate this
to it as per the fixed weight procedure. This
help
year itself. So what made this possible?
base rate was last revised in January 2010 by
tough
the
steps
in
Government
in
the Indian Government
achieving that goal.
This sudden surge in India’s economy was
The change in base year of national accounts statistics will result in an increase in the size
due the change in base rate for the GDP
One of the reasons why Indian public voted
calculation. Previously Indian Government
for BJP in the recent polls and eventually Mr.
used financial year 2004-05 for GDP growth
Narendra Modi as the Prime Minister of India
rate calculation but now the base year has
was due to frustration of lack of development
been changed to financial year 2011-12.
and thus lack of growth in India’s GDP. With this recent change, it seems that India was not
of the economy in 2013-14 to
First let’s understand what base year has
doing as bad as it was perceived, in the UPA
Rs.111.7 trillion as against the
impact
For
administration. As soon as the base year was
earlier estimate of Rs.105.4
calculating the real GDP of a country, the
changed, Mr. P. Chidambaram came in the
trillion.
economic trends of the current year are
defence of the previous government led by
calculated with reference to the economic
Congress saying that the credit of the revival
trend of another year defined as the base year
of the economy goes to the UPA government
for that calculation. It is done so to eliminate
only.
on
the
GDP
calculation.
the impact of inflation of such calculation. This change will boost Indian growth rate for ₹ (Base Year) is calculated as:
the current year which was predicted by RBI to be around 5.5 per cent. It will also reduce the fiscal defect for the country despite the shortfall in revenue.
CHANGES IMPLEMENTED Apart from updating the base of national
decision of central bank to lower interest rates
accounts to 2011-12 from 2004-05, Indian
on the weak growth rate of India. The
Government has implemented some other
government has mentioned that this change
changes as well which have been explained
has not impacted the ratios much but it has
below:
definitely transferred the onus of maintaining
in January was correct as it was partly based
the GDP growth rate on the new government. Change
in
Method
to
comply
with
International Practice While compiling numbers, the government has moved to the internationally accepted market prices as opposed to the previous factor-cost method, which considered cost of
factors consumed for producing goods and services. Thus, instead of GDP at factor cost, Gross Value Added (GVA) will be taken for in the official releases by the Indian Government. Increase in Coverage Coverage has become wider to include a bigger set of numbers from the corporate affairs ministry's database and more of the unorganised sectors. In terms of the size, the economy remains the same at nearly Rs 113.5 lakh crore in fiscal 2014, which suggests some growth redistribution is behind the spurt in growth from earlier estimate. IMPACT OF CHANGE It is still uncertain what this calculation change will mean for the more recent growth but it has raised question that whether the
Source: Ministry of Statistics and Program Implementation
- By Priti Sureka
Capital establishes
Gearing
Ratio
relationship
between equity financing and debt financing. This ratio is critically analyzed by potential investors, Banks and other
Capital Gearing ratio is one of the fundamental ratios used by financial analysts, bankers and investors to understand the capital structure of a company. It basically indicates the relationship between various types of securities. This ratio is also known as financial leverage. This ratio differs between companies and industries and even change time to time. This is the most difficult and important ratio for managers to decide on source of financing.
financial institutions.
Capital Gearing Ratio = Equity/Fixed Interest Bearing funds, where Equity includes Equity Share Capital, Free Reserves, and Balance in Profit and Loss Account. Fixed Interest Bearing Funds include Debentures, Preference Capital and Long term loans.
An investor studies the balance sheet and capital gearing ratio of a company before investing into it. Therefore, this ratio is carefully analyzed by actual and potential investors. Although cost of external funds is relatively cheap but a highly geared company is a risky investment for potential investors as the company will have fixed obligations in terms of interest expense and it may fail in paying regular dividend. Even Banks and other Financial Institutions don’t easily give loans to highly geared companies. At the time of leveraged buyout, the ratio increases as the company will employ more debt in order to finance the acquisition. Therefore, before undertaking a leveraged buyout, a company must critically evaluate its ability to pay additional amount of interest.
A company is said to be low geared if major portion of the capital structure is financed by equity. While, if the company is majorly Depending upon the situation or any event, a financed by external funds or fixed interest company may wish to increase or decrease bearing securities then the company is said to the ratio. A company can increase the ratio in be highly geared. A high gearing ratio following waysindicates that company is using debt for its normal operations and in a business Raise additional debt downturn these companies may face Buy back issued shares bankruptcy risk. Whereas a low gearing ratio Pay dividend from the retained earnings indicates a conservative financial management. A company can also decrease the gearing ratio depending upon the market requirements in In case of a regulated industry such as utility the following waysindustry, a high or low gearing ratio is least concerned. Some companies may have large Repay a part of interest bearing debt and continuous fixed assets requirements, Issue new equity shares and pay off such companies are likely to have a high external borrowing gearing ratio.
INDIAN MARKETS Selling activity took its toll and dragged the benchmark Indian Indices lower too. The benchmark indices were down by 0.3% for the week gone by. Besides various macro factors, lower than expected earnings of some blue-chip companies pushed the indices to lower levels. Most of the global markets ended on a negative note in the week gone by. Disappointing macro economic data and weak corporate earnings cut short the market optimism. Among the global indices, the Chinese market (down 4.2%) was the top loser during the week.
Open
High
Low
Close
SENSEX
27173
29,844.1
29,070.48
29182.95
NIFTY
8854.7
8,996.60
8,775.1
8808.9
BSE SENSEX
CNX NIFTY
COMMODITIES Commodity
Unit
Rs / Unit
% Change
Gold
10 grams
27895.00
1.71
Silver
1 kg
38105.00
2.15
Crude Oil
1 bbl
2855
3.54
EXCHANGE RATES INR/ 1 USD
61.75
INR /1 EURO
70.02
INR/ 100 JAPAN YEN
52.4
INR / 1 POUND STERLING
93.13
INTERNATIONAL MARKETS
Open
High
Low
Close
NYSE Comp
10787.3
10,670.18
10,532.55
10537.22
NASDAQ
4752.36
4,703.81
4,631.10
4635.24
S&P 500
2050.42
2,023.32
1,993.38
1994.99
FTSE 100
6754.72
6,843.98
6,749.40
6749.4
CAC
4620
4,660.71
4,583.68
4604.25
DAX
10592.97
10,804.04
10,555.51
10694.32
NIKKEI 225
17761.73
17,808.47
17,661.10
17674.39
SSE 50
2562.92
2,471.23
2,400.63
2405.38
Hang Seng
24850.45
24,771.37
24,450.05
24507.05
US President Barack Obama assures $4 billion investment in India Addressing an India-US CEO summit hosted by Prime Minister Narendra Modi, Obama committed a $ 4 billion financial package to set the ball rolling and said the two countries would work together to develop new technologies to help India leap forward. The Overseas
Private Investment Corporation will lend $1 billion to small and medium sized enterprises US President Barack Obama visit to India brings $4 Bn investment in India
Sergio Matterella elected as the 12th President of Italy
in underserved rural and urban areas of India. Besides, the U.S. Export-Import Bank would finance $1 billion in exports of 'Made-in-America' products to India. The $4 billion deals include $2 billion of leveraged financing for renewable energy investment. At the same time, Obama sought consistency and simplicity in the tax and regulatory environment in India and resolution of issues relating to intellectual property rights to significantly increase trade and business between the two countries. India crosses nuclear liability hurdle, which makes easier for companies to invest in India's nuclear power sector.
India tops the Credit Suisse
Defence framework agreement was renewed for 10 years Defense Technology and Trade
emerging Consumer scorecard
Initiative operationalized with focus on co-development and coproduction in India for India
mainly because of formation of
and global market, should boost 'Make in India'.
strong government at centre and rising share in e-commerce
Sergio Mattarella elected as President of Italy
in India
Italy’s parliament has elected constitutional court judge Sergio Mattarella as the country’s president. He will be Italy’s 12th president and succeed Giorgio Napolitano who had resigned earlier in January 2015 citing reason of poor health before his 2020 expiry term. India tops Credit Suisse emerging consumer scorecard 2015 India has topped in the list of Credit Suisse emerging consumer scorecard 2015, among the 9
emerging economies. This scorecard was prepared by fifth annual Emerging Consumer Survey by the Credit Suisse Research Institute. The survey had interviewed consumers across nine emerging economies including Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey. This survey had profiled the consumer sentiment and its drivers across the emerging world. Thus, providing insights regarding consumer sentiment and future consumption patterns in emerging economies. As per the survey, the formation of a strong government at the Centre in India had triggered a major revival of consumer sentiment in 2014. It also mentioned that, e-commerce share in India have increased to 32 per cent from 20 per
cent in 2013. In 2014 survey, India was placed at fourth position.
Record Coal India share sale boosts privatization drive India has raised about $3.6 billion by selling a 10 percent stake in state-run Coal India Ltd in the largest ever equity deal in the local market, giving a welcome boost to the government's faltering divestment drive. The share sale will move the government closer to the still
distant target of raising $10 billion by selling minority stakes in state-owned companies to India raised $3.6 Bn by selling 10% stake in state run Coal India Ltd
to the Coal India issue is expected to bolster the government's plans to offload shares in other state firms including Oil and Natural Gas Corp and Power Finance Corp. Overseas and local portfolio investor demand for Coal India shares exceeded supply, with
Third Quarter results of IT companies
trim the fiscal deficit to a seven-year low by the end of March. The strong investor response
shows
signs
of
their category oversubscribed by 1.2 times. Third Quarter Results announced for different IT companies
positivity
Infosys, which posted a 13 percent rise in third-quarter profit, confirmed it expects sales Change in base year for GDP
growth of 7 to 9 percent for the year ending in March 2015, in constant currency terms and
calculation,
based on exchange rates for the September quarter.
surges
the
economic growth rate to 6.9%
India's third largest software services company Wipro, in the midst of a turnaround, announced slightly better-than-expected third-quarter numbers. It clocked revenues of Rs 12,085 crore for the quarter ending December 31, a sequential growth of 3.8 per cent. The net profit of the company was Rs 2203 crore, a growth of 5 per cent over the previous quarter. Wipro, however, is likely to end the year with 7 to 8 per cent growth, less than the industry growth pegged at around 13 per cent. Tata Consultancy Services Ltd (TCS), the country's largest IT services exporter, reported a net profit of Rs 5,440 crore, up 2.94% QoQ, for the third quarter of the current financial year. Base year for GDP changed, Indian economy grew at 6.9% A change in base year for computing national accounts pushed up the economic growth rate for 2013-14 to 6.9 per cent, while earlier estimate on the basis of old series was 4.7 per cent. Similarly, the economic growth rate for 2012-13 has been revised upwards to 5.1 per cent, compared with 4.5 per cent estimated earlier. These changes follow a revision in the base for calculating national accounts to 2011-12 from 2004-05. The base year was last revised in January 2010. Besides, government also introduced the new concepts like Gross Value Added (GVA) to the economy. Changes are aimed at improving the "ease of understanding (data) for analysis and facilitate international compatibility". Similarly, the economic growth
rate for 2012-13 has been revised upwards to 5.1 per cent from earlier estimate of 4.5 per cent.
CEO of McCann Worldgroup India, Writer, Poet, Lyricist, Adguru and Ex-IMTian was elevated to executive chairman for
McCann Worldgroup India and regional creative director for Asia Pacific. Notable are his campaigns for NDTV India
16th Sept 1971
(Sach dikhate hain hum), Saffola (Abhi to main jawan hoon) LG, Marico, Perfetti and the Cannes-winning Thanda matlab Coca-
MBA - IMT Ghaziabad
Cola campaign with Aamir Khan. His Happydent
television
commercial
is
considered by experts as India's best ad till Recently awarded Padma Shri
date, which has rightfully earned him the title
- fourth highest Civilian award
Born in Almora, Uttarakhand in 1971. In his
of "The Ad Guru of India". Prasoon has also
for his contribution in poetry,
childhood, he has travelled across the North
offered his services for various public service
cinema and communication as
India, which gave Prasoon a remarkable feel
campaigns.
a writer
for the real Indian pulse that he is now
Twice won the National Award
celebrated for in his lyrics and advertising. Film Career and Global Recognition Prasoon did his BSc and post graduation in He made his debut as film
for best Lyricist
Physics, then elected to pursue an MBA with Rajkumar Santoshi's Lajja, and this soon
Thrice
won
Lyricist Award
lyricist
from Institute of Management Technology, led to Yash Chopra's Hum Tum and a string of Filmfare
Best
Ghaziabad
in
1988.
During
his
MBA highly
successful
Bollywood
films
education he decided to fuse his love for like Fanaa, Rang De Basanti, Taare Zameen culture and art and his faculty for the Par, Black and Delhi 6. With Rang De commercial dynamic and make his career in Basanti (2006), he also became a dialogue advertising.
writer. He won the Filmfare Best Lyricist Award
for
"Chand
Sifarish"
from
the
film Fanaa in 2007, for "Maa" from Taare Career He started his career with one of the world's Zameen Par in 2008 and for “Zinda� from leading agencies, Ogilvy & Mather, in Delhi. Bhag Milkha Bhaag in 2014. He has won the Over 10 years, he became a creative star and prestigious National Award twice. The first for rose to be executive creative director of the his work in Taare Zameen Par and the second flagship Mumbai office. In early 2002, he one in 2013 for Chittagong. Prasoon has also joined McCann-Erickson as executive vice- been a part as a Jury member at Cannes, president and national creative director. By Commonwealth games in 2010. He was 2006, he was regional creative director, South awarded Padma Shri, the fourth highest and South East Asia. In December 2006 he civilian award of India, recently in 2015.
-by Mohana Krishna Kummara
Energous
Corporation
technology property
and
licensing
is
a
intellectual company
which will leveraging strategic partnerships to expand the WattUp ecosystem.
The entire WattUp wire-free charging system is software controlled.
Using either a
mobile app or cloud-based web portal, you can to identify which devices you want to receive power, in which order of priority, and even at what times you want the devices to charge.
In today’s world we cannot imagine our world without gadgets. Mobiles phones to laptops all the gadgets face same problem, charging them. These mobile devices are no more mobile when they are tied to their chargers. So, power without wires is what we need now. But sadly none of the current wireless charging technologies have set our devices free from a charging pad, which is tantamount to plugging them in, really. Energous is one of the very few companies which are planning to change this. It claims that you can charge you devices from up to 15 feet away, without need of any wires. It is called WattUp, which won the best innovation and best home product of Consumer Electronics show 2015.
which does the magic. It locates and communicates with all of the devices within its range using low-energy Bluetooth. Once it has established contact with the device, it sends focussed RF signals on the same bands as WiFi that are then absorbed and converted into DC power by a tiny chip embedded in the device. These transmitters can be built into any household appliances, TV’s, speakers and standalone “energy routers”.This conversion which is known as “rectification”, is not a new idea, but its application into WattUp by Energous is.
As of now there are no devices that directly integrate with Wattup technology. For the purpose of demonstration Energous used modified battery cases for phones. With the How it works? size of the chips, which are very small nothing It works using a mix of Bluetooth, RF and a lot is stopping Samsung or Apple from adding of patented technology. It is the transmitter this technology to their devices.