Financial institutions propose mega merger of steel companies
Mumbai: Financial institutions, which have a huge exposure in four private steel groups, have floated a proposal to merge these companies into a single corporate entity. The four groups include the Essar, Jindal, Ispat and Lloyds groups.

The proposal is not new and has been implemented successfully in the West. It is understood that the current proposal has been modelled on the lines of the UK-based British Steel, where a number of smaller sick steel units were merged to form the mega entity.

If the proposal goes through, it would create a domestic steel conglomerate with a capacity of about 9.8 million tons. The merged entity would dominate the industry and would be above the two existing big steel companies, state-owned SAIL with a capacity of 8 million tons and the private giant Tisco with a capacity of 3.5 million tons.

The financial institutions, which have a combined exposure of Rs. 20,000 crore in these four companies, are moving this proposal in order to protect their interests. According to known sources, the proposal is still at a very early stage and may take a very long time to materialise, if it ever does. The reaction of promoters was mixed, but most were sceptical or even hostile.

While some groups like the Lloyds group welcomed the idea, others like the Jindal group vehemently opposed the move on the grounds that efficient companies would also become sick in this process.

Financial institutions, however, feel that the merged entity will have strong competitive strength to face the challenges of an open economy, besides having a diversified geographical presence which will enable it to realise better prices.
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Consumer finance companies in the doldrums
Mumbai: With the ongoing slowdown affecting the volumes in the Rs. 20,000 crore consumer durables segment, the consumer finance companies are beginning to feel the heat.

The revenue models of most consumer finance companies are going awry, forcing them to either opt out of or go slow on consumer financing this year. The going is so bad that some finance companies may not even break even this year.

Well know companies like Kotak Mahindra have totally exited from consumer durable financing, while bigger players like GE Countrywide Consumer Financial Services are understood to have slowed down disbursement of loans this year.

ICICI, which went the whole hog with a very aggressive selling of their finance schemes, is understood to have put a freeze on all hard sell in trying to entice consumers to borrow. Industry sources say that aggressive selling by all players has resulted in increased delinquencies in the market.
The consumer durable financing business is largely dependent on volumes and the low volumes prevailing today have not been enough for financiers to cover their operational, administrative and collection costs and other overheads and yet be profitable.

Sales of colour televisions, refrigerators and washing machines have fallen sharply while the growth of ACs has been flat this year. Interest rates in this market hover around 17-18 per cent and have, in fact, dropped to around 16 per cent this year.
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One more bidder exits the aviation race
New Delhi: Following the civil aviation ministry’s decision to hold back all new licenses till a study on the growth of the domestic passenger traffic has been completed, Crown Express, one of the start-ups, has decided to pull out of the race for a share in the domestic aviation pie.

The company, which waited without success for almost a year to get civil aviation ministry’s permission to start operations, has walked out in frustration. According to sources, the decision to study passenger traffic trends is seen by the company as a deliberate delaying tactic to favour vested interests.

Crown sources also state that since the Director General of Civil Aviation had projected healthy growth in domestic market, indicating that the market was ready for expansion, Crown feels there was no need to delay licences.

According to industry sources Crown’s experience is virtually similar to the Tata group’s bid to enter domestic aviation which was blocked by vested interests.
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Finance minister approves Madhavpura revival package
Ahmedabad: It is understood that the finance minister has given a positive response to the revival package sewn together by the committee set up to revive the troubled Madhavpura Mercantile Co-operative Bank.

The package envisages a guarantee from central government, as well as a sizeable interest-free loan from the RBI-sponsored Deposit Insurance and Credit Guarantee Corporation.

The finance minister is understood to have given an in-principal approval to the revival package. The final decision will now be taken at a meeting between the representatives of the government of Gujarat and the Reserve Bank of India.

The central government is keen on the Gujarat government being party to a portion of the risks involved in reviving MMCB.

According to the plan, 150 select co-operative banks of Gujarat will lend 4 per cent of their total deposits to MMCB for 10 years, at a reduced interest rate of 7.5 per cent and this will be routed through Gujarat State Co-Operative Bank and Ahmedabad District Co-Operative Bank.

If MMCB is not in a position to pay back the full principal and interest after 10 years, the state and central governments will be obliged to make good the difference.
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Major chains bid for food plazas at railway stations
New Delhi: In its bid to create food plazas at railway stations, the Indian Railways has received over 25 applications from leading fast food chains that include Wimpy, Nirulas and Dominos.

The project is being co-ordinated by the Indian Railways Catering and Tourism Corporation (IRCTC), whch has plans to launch over 12 Food Plazas across the country. IRCTC will soon shortlist the bidders for the 12 proposed sites, while the process for 13 additional sites will begin thereafter.

The food plazas will be coming up in Delhi, Mumbai, Chennai, Pune, Nagpur, Agra, Gorakhpur and various other railway stations.
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