[aaykarbhavan] business standard news updates 27-11-2012

Chitra Ramkrishna to take over as NSE chief

BS REPORTER Mumbai, 26 November Chitra Ramkrishna ( 49) will take over the reins of the National Stock Exchange ( NSE) on April 1, 2013, from the current managing director ( MD) and chief executive officer (CEO), Ravi Narain. Ramkrishna is the joint MD of NSE and has been with India's largest equity trading venue since its inception in 1992. Narain ( 57) will remain with the NSE as vice- chairman of the board, a post created for the first time by the exchange to accommodate him. Narain was deputy MD of the NSE for the first six years since 1992 and the MD and CEO for over 12 years now. The NSE, currently among the top 20 global exchanges in terms of market capitalisation, was incorporated in 1992 and received recognition as a stock exchange in 1993. It is the country's top bourse after equity derivative operations were launched on its platform in 2000. The exchange has a market capitalisation of around $ 1 trillion and over 1,600 listed companies. NSE's derivative segment, which has an average daily turnover of nearly ₹ 1,50,000 crore and 80 per cent market share, was developed under Narain's leadership. Also, the exchange's distribution saw a significant growth as it currently reaches out to over 1,500 towns and cities in India via 2,00,000 trading terminals. Prior to joining the NSE, both Ramkrishna and Narain were with IDBI Bank, a promoter of the NSE. Ramkrishna holds a degree from the Chartered Institute of Management Accountants, UK, and is also a member of the Institute of Chartered Accountants of India. Apart from the NSE, she also holds senior positions in other companies promoted by the exchange. Ramakrishna was part of the committee on financial sector reforms headed by Raghuram Rajan in 2008. Narain has a degree in economics from Cambridge University, UK and a degree in business administration ( finance) from the Wharton School, University of Pennsylvania, US. Chitra Ramkrishna Ravi Narain Narain will remain with the NSE as vice- chairman of the board, a post created by the exchange to accommodate him

 

Sebi may align OFS and trade settlement cycles SAMIE MODAK Mumbai, 26 November The Securities and Exchange Board of India is looking at aligning the trade settlement cycle for offer for sale ( OFS) with the cash segment, after it came to light that a variation between the two had opened a huge arbitrage opportunity for punters. The settlement for OFS takes place on a T+ 1 basis (transaction date plus one day), while a normal trade is settled on a T+ 2 basis ( transaction date plus two days). Thanks to the steep discount between Hindustan Copper Ltd's ( HCL) floor price and the secondary market price, a number of speculators had short- sold the stock in the cash market and bid for an equal amount in the OFS. Later, shares bought in the OFS were used for securities pay out in the cash segment. Trades under OFS are settled on the T+ 1 basis as investors have to cough up 100 per cent upfront margins. Analysts said different settlement cycles indeed provide for an arbitrage opportunity but it was accentuated as HCL shares were offered at a sharp 40 per cent discount in the OFS. Punters could have easily made about 40 per cent profit last week in the Hindustan Copper OFS. Shares of the state- owned copper manufacturer had closed at ₹ 266 on Thursday, the day it announced the floor price of ₹ 155 for its OFS to be held next day. After the stock opened on Friday, due to heavy selling pressure, it hit the lower circuit limit of 20 per cent to close at ₹ 213. Traders, who could sell the stock in the cash segment, entered bids in the OFS for an equal amount. Assuming a trader sold shares at a lower price of ₹ 213 in cash and bought shares in OFS at ₹ 156, he would have made a profit of at least 37 per cent. "Sebi should look at whether HCL was an anomaly or is it a consistent practice for all OFS," said Arun Kejriwal, founder, KRIS Research. Analysts said a similar strategy was used in the Blue Dart OFS, which was held on the same day. The floor price for the Blue Dart OFS was fixed at ₹ 1,720, while the secondary market price was nearly ₹ 2,015. The bids for Blue Dart were accepted at an indicative price of ₹ 1,833. However, in the case of Blue Dart, allotment under OFS was not guaranteed, as the share- sale was subscribed. Hindustan Blue Dart Copper Floor price (~) 155 1,720 Market price** (~) 213 1,993 Difference (%) 37.4 15.9 Indicative price (~) 157 1,833 Offer size* 88.72 1.43 Total bids received* 51.61 5.18 Source; BSE; Note: * No of shares ( in million), ** On OFS day GOLDEN CHANCE Both Hindustan Copper and Blue Dart OFS presented a huge arbitrage opportunity for investors Variation has opened a big arbitrage window, which was exploited in the Hindustan Copper offer for sale Irda looking at risk- based solvency model for insurers BS REPORTER Mumbai, 26 November The Insurance Regulatory and Development Authority (Irda) plans to shift insurance companies to a risk- based solvency model from the current factor- based solvency model. The regulator has set up a committee headed by an actuary for this purpose and it will present a report to the Irda chairman by January. Speaking on the sidelines of a Ficci- BOAO Forum for Asia, Radhakrishnan Nair, member ( finance & investment) at Irda, said, " As we have Basel- III norms for the banking sector, there are Solvency- II norms internationally for insurance companies. Since we now have factorbased solvency being followed in India, Irda wants to move gradually towards a risk- based solvency." Nair added that although this would not be a replica of the Solvency- II norms, it will follow the broader parameters of the norms in the US, the UK, Canada and other such countries. Solvency- II refers to a common set of rules applicable to the European Union's ( EU) insurance sector. These are made up of provisions related to capital requirements for the companies, regulatory assessment of a specific firm's risk, as well as the regulator's broader supervision of the entire marketplace. SolvencyII has not yet come into force in the EU. The committee, comprising experts from the sector, will prepare a report on both the life and non- life insurance segments. However, Nair said that there would be no dilution in the regulatory capital requirement. The present solvency margin stands at 150 per cent. According to Nair, the model would involve some risk management by a company and help maintain a standardised model and appropriate risk- based pricing. After presentation of the report, the committee will have a procedure to run it ( new model) through the present model of major insurance companies. Sets up panel for feasibility study Not looking to increase investment limit for private insurers: Regulator The Insurance Regulatory and Development Authority ( Irda) is not keen to increase the equity investment cap for private insurance companies. The present cap stands at 10 per cent for private insurers. Radhakrishnan Nair, member ( finance & investment) of Irda, said that a revision in limit can only be facilitated if there is a change in the Insurance Act. "Insurance Act is the mother act of Irda. Only if there is a modification in the Act, can the investment cap of 10 per cent be hiked," he said on the sidelines of a FICCI- BOAO Forum for Asia. The Life Insurance Corporation of India ( LIC) has been allowed to invest up to 30 per cent, according to a notification by the finance ministry.

 

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CS A  RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
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