Financial Blog

Noble Group launches $1-billion loan facility - sources

By Chien Mi Wong and Anshuman Daga

HONG KONG/SINGAPORE (Reuters) - Noble Group will have to fork out more than double in interest margin on a $1-billion unsecured loan it is raising with banks, as a fall out of the commodity traders credit rating downgrades, sources familiar with the matter said.

The Singapore-listed firm has launched a 364-day revolving credit facility, which will pay an interest margin of 225 basis points over LIBOR, compared with 85 basis points interest margin for last years one-year $1.1 billion loan, said the sources, who declined to be identified as the information is not public.

Noble, which previously said the latest loan would come at a higher price, declined to comment on the story on Tuesday.

A successful raising of Nobles loan, which is not backed by assets, will help it repay part of its debt maturing in May and could reassure investors about its finances following a $1.2-billion writedown on assets and a full-year loss.

Noble, one of the biggest traders of commodities from coal to iron ore to oil, is battling to boost investor confidence after Standard Poors and Moodys cut their investment grade ratings on the company to junk, following a bruising accounting dispute and weak markets.

Hong Kong-headquartered Noble has said its overall funding costs were decreasing as it was stepping up low-cost secured lending from banks and cutting capital spending.

Its latest loan comes on top of a $2.5 billion secured financing that it is seeking in the United States from its lenders.

Noble has launched the $1-billion loan into general syndication and the deadline for responses is May 3, the sources said. Previously, the company was said to be looking to raise $1.5 billion in unsecured loans.

Loss-making Noble has mandated eight banks including Societe Generale, MUFG, HSBC and DBS as lead arangers, the sources said.

HSBC and Societe Generale declined to comment. Bank of Tokyo-Mitsubishi UFJ (MUFG) and DBS had no immediate response.

Shares in Noble, which has been grappling with a rout in commodity prices and an attack on its accounting practices, plumbed 12-year lows in January, but have recovered around 40 percent over the past two months.

(Reporting by Chien Mi Wong of LPC and Anshuman Daga in SINGAPORE; Editing by Denny Thomas and Himani Sarkar)

J&K gets over Rs 18000 cr PLC Plan from NABARD

National Bank for Agriculture and Rural Development (NABARD) has prepared over Rs 18,000 crore Potential Linked Credit Plans for all the districts in Jammu and Kashmir for 2016-17.

NABARD has prepared Potential Linked Credit Plans for all the districts and assessed priority sector credit potential of Rs 18058.50 crore for Jammu and Kashmir for 2016-17, Chief General Manager (CGM), NABARD, JK, Shanker A Pande told reporters here today.

He said the strategy to enhance the credit support to priority sectors was discussed in State Credit Seminar 2016-17, inaugurated by Jitendra Singh, Minister of State for Development of North Eastern Region.

Banks are expected to gear up to disburse incremental loans to agriculture and priority sectors in the state during 2016-17 and NABARD would be willing to increase its refinance support manifold, he said.

On the implementation of government-sponsored subsidy schemes, he said NABARD sanctioned aggregate subsidy support of Rs 40.80 crore under various Government Sponsored Schemes during 2015-16.

This covered assistance to farmers and entrepreneurs for the purposes such as dairy development, solar lighting, rural godowns, agri clinics, agri business centres, etc, he said.

Regarding area development schemes for Capital formation in agriculture,Pande said for bringing efficiency in production and enhancing the productivity, farmers need to make long-term investments.

Asset creation and technological improvement in farming is also necessary for sustainable growth in agriculture which calls for adequate investment credit supply by banks, he added.

NABARD, with the active involvement of financing banks and district development agencies in the state has been able to launch nine area development schemes in various districts of JK, he said.

CGM said these schemes are primarily meant for financing of dairy animals, sheep and goat rearing and apple plantations.

Out of the 5 schemes launched in five districts in phase I, banks have reported disbursement of Rs 18 crore bank credit to dairy activities.

On the issue of loan assistance to state government for creating rural infrastructure, CGM said during 2015-16, under its Rural Infrastructure Development Fund (RIDF), NABARD sanctioned new projects with loan assistance of Rs 354 crore to J K.

This signifies all-time high sanction accorded in the past few years. This would enable the government to take up as many as 137 rural infrastructure projects, covering Roads and Bridges, health and animal/sheep husbandry sectors, he said.
Regarding NABARDs all-round support for development of J

K for 2015-16, he said during the year, the bank has made multifaceted contributions for the development of the state through its financial support and promotional interventions.

In tune with its mandate to bring about agriculture and rural development and inclusive growth, NABARD made substantive interventions in critical areas such as agricultural and rural credit, microfinance, strengthening of rural financial institutions, profitability of smallholder agriculture, financial inclusion, etc, he added.

Other plans included institutional and technological development in rural financial institutions, area development schemes for increasing ground level credit by banks, Supervision of Rural Financial Institutions (RFIs).

During 2015-16, against sanction of Rs 596.23 lakh under various promotional initiatives viz. MCID, FIF, FSPF, PRODUCE Fund, OFDF, RD an amount of Rs 324.77 lakh were disbursed.

Regarding the Climate Change, CGM said climate change is for real and it is happening.

It is affecting the lives of people in J K and is a major challenge for agriculture, food security and rural livelihood.

Poor, marginalised and rural communities are hit the hardest by the adverse impacts of climate change, he added.

NABARD has been designated as the National Implementation Entity for the UN Green Climate Fund (GCF) and Indias National Adaptation Fund for Climate Change (NAFCC).

Joint Liability Groups (JLGs) have been envisaged as a strategy for purveying credit to small and marginal farmers, landless farmers, oral lessees, share croppers, etc., reducing their dependence on informal sources of credit, as also to augment flow of credit to landless farmers who are unable to provide land title as guarantee, he added.

For the first time in J K, a modest beginning was made with the initiative and support by NABARD in financing of over 300 JLGs by banks during 2014-15.

On the issue of Farmers Producer Organisations (FPOs) and Farmers Clubs for Collectivisation, he said over 90 per cent of the farm holdings in the state are small and marginal with average holding of 0.67 ha.

This poses challenge to farmers in terms of profitability of agricultural operations and calls for collective approach to farming for attaining economies of scale in their operations as also accessing services such as improved technology, farm extension and banking facilities collectively, he added.

Short-term loans to get cheaper

Come Friday, the benchmark rates are expected to be lower by 80-90 basis points (bps) for short-term credit as banks begin to price new loans on the basis of marginal cost of funds.

It will drive financially sound companies hunt for the best lending rate (for short-term credit) under the new regime, leading to some competition among banks.

This could also hit the issuance of commercial papers (CPs) as companies begin to avail of credit limits than to use the money market for short-term need, bank executives said.

The Reserve Bank of India (RBI) has prescribed the new system to improve transmission of monetary policy. The RBI has cut key policy rate (repo rate) by 125 bps, since January 2015 to 6.75 per cent now.

Responding to the central banks actions, banks also reduced their benchmark lending rates (base rate) but not in same proportion. They have cut by 55-75 bps. They brought-down deposit rates by 85-100 bps in past 12 months, according to RBI data.

Along with benchmark rates (for loan), banks could also change (reduce) interest rate on deposits to bring-down cost of funds further. The sharp cut in rates on small savings deposits is giving enough room for banks to tweak rates further.

Under the new regime, instead of one benchmark rate, banks would indicate at least five, varying by tenure. Starting with a rate for a fortnight, they would quote rates for buckets of a month, three months, six months and a year. The RBI has left it to banks to decide on more rates for longer tenures.

Rating agency ICRA has said it expects banks short-tenure median MCLR (marginal cost lending rate) to be lower than the current base rates (BRs) by 80-90 bps.

Abhishek Bhattacharya, director, India Ratings Research, said the benchmark rate for many banks would be lower by 80-100 bps at the short end. Banks with a higher asset to liability mismatch would see a bigger effect. Those with a track record of better management in this regard would not see much change.

The effect would be more pronounced at the short end of tenor (fortnight, one month and three months), in line with the trend in the money market (commercial paper issued up to three months). As the loan tenure grows, the effect would be less.

Concurring, a senior State Bank of India executive said the immediate effect would be seen in corporate lending, to medium and large companies. While there could be some client takeover activity, it is unlikely to trigger a #39;war#39; among banks. The effect at the short end would be around 25 bps; at the long end, it could be as low as five bps.

He declined to elaborate on what would be SBIs rate; its present Base Rate is 9.3 per cent. It had cut the key rate by 40 bps from October 5, 2015.

Vibha Batra, group head (financial sector rating) at ICRA, said customers with better credit profiles would either switch to new lenders or request their existing ones to switch their loans to the MCLR-linked base. In either case, banks are likely to face significant challenges.

Further, there could be more variations in MCLR across banks than in the case of BRs. The expected reduction in short-tenure MCLR, in turn, would allow them to offer short-tenure loans at competitive rates vis-agrave;-vis the discount rates (interest rates) in the CP market, ICRA said.

At present, banks are following different methods in computing their BR on the basis of average cost of funds, marginal cost or blended cost of funds (liabilities). BRs based on marginal cost of funds should be more sensitive to changes in RBI policy rates.

RBI has indicated it would encourage banks to explore the use of external benchmark for pricing bank products. This could happen after The Financial Benchmark India Ltd, an independent benchmark administrator, starts publishing various indices of market interest rates.

Sensex drops 9.35% in FY 2016

Amid a divergent trend among various index constituents, the two key benchmark indices ended near the flat line on the last trading day of the financial year. The barometer index, the SP BSE Sensex, rose 3.28 points or 0.01% to settle at 25,341.86. The Nifty 50 index rose 3.20 points or 0.04% to settle at 7,738.40. A bout of volatility was witnessed in late trade as key benchmark indices regained positive zone after slipping into the red from green. The Sensex and the Nifty edged higher for the second day in a row. With minuscule gains, the Sensex and the Nifty, both, hit their highest closing level in more than 12 weeks.

Shares of companies engaged in exploration production of natural gas fell on reports that the government has reduced the cost of locally produced gas by about 20% for the six months period starting 1 April 2016. Gas utility stocks rose on reports that the cut in gas price would reduce raw material costs and expand margins of gas utility firms. Most metal shares declined after global credit ratings agency Standard Poors (SP) cut the outlook on Chinas sovereign credit rating to negative from stable.

In overseas stock markets, European stocks edged lower as investors remained cautious ahead of the release of euro zone inflation data due later in the day. Earlier during the global day, most Asian stocks edged lower. US stocks extended gains for the third day yesterday, 30 March 2016, although shares ended well off their days highs amid a dip in crude oil prices. Sentiment was underpinned by data from payroll firm ADP showing slightly stronger than expected private sector job growth in March.

The Sensex rose 3.28 points or 0.01% to settle at 25,341.86, its highest closing level since 6 January 2016. The Sensex rose 141.04 points, or 0.56% at the days high of 25,479.62. The index fell 115.36 points, or 0.46% at the days low of 25,223.22.

The Nifty rose 3.20 points or 0.04% to settle at 7,738.40, its highest closing level since 6 January 2016. The Nifty rose 42.40 points, or 0.55% at the days high of 7,777.60. The index fell 33.20 points, or 0.43% at the days low of 7,702.

The Sensex and the Nifty edged higher for the second day in a row. The Sensex has gained 441.40 points or 1.77% in two trading sessions from its close of 24,900.46 on 29 March 2016. The Sensex clocked gains of 2,339.86 points or 10.17% in March 2016. The Sensex declined 2,615.63 points or 9.35% in the year ended 31 March 2016 (FY 2016). The Sensex has fallen 775.68 points or 2.97% in calendar year 2016 so far (till 31 March 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the Sensex has risen 2,847.25 points or 12.65%. The Sensex is off 3,752.75 points or 12.89% from a 52-week high of 29,094.61 hit on 15 April 2015. The Sensex is off 4,682.88 points or 15.59% from a record high of 30,024.74 hit on 4 March 2015.

The market breadth indicating the overall health of the market was positive. On BSE, 1,306 shares rose and 1,247 shares fell. A total of 187 shares were unchanged. The BSE Mid-Cap index rose 0.68%. The BSE Small-Cap index rose 0.46%. Both these indices outperformed the Sensex.

Among the sectoral indices on BSE, the SP BSE Consumer Durables index (up 1.21%), the SP BSE Power index (up 0.82%), the SP BSE IT index (up 0.66%), the SP BSE Healthcare index (up 0.66%), the SP BSE Utilities index (up 0.64%), the SP BSE Teck index (up 0.63%), the SP BSE FMCG index (up 0.57%), the SP BSE Consumer Discretionary Goods Services index (up 0.46%), the SP BSE Realty index (up 0.25%), the SP BSE Finance index (up 0.07%), the SP BSE Basic Materials index (up 0.05%) and the SP BSE Bankex (up 0.02%) outperformed the Sensex. The SP BSE Industrials index (down 0.07%), the SP BSE Telecom index (down 0.12%), the SP BSE Capital Goods index (down 0.18%), the SP BSE Energy index (down 0.46%), the SP BSE Oil Gas index (down 0.64%) and the SP BSE Metal index (down 0.77%) underperformed the Sensex. The SP BSE Auto index rose 0.01%, with the gains in the index matching the gains in the Sensex.

The total turnover on BSE amounted to Rs 2707 crore, higher than turnover of Rs 2545.99 crore registered during the previous trading session.

Index heavyweight and cigarette major ITC rose 0.86% to Rs 329.50. The stock hit a high of Rs 332.45 and a low of Rs 325 in intraday trade.

Index heavyweight and software major Infosys advanced 1.18% to Rs 1,220. The stock hit high of Rs 1,228.95 and low of Rs 1,200.60 in intraday trade. Infosys is set to announce its Q4 March 2016 results on 15 April 2016.

Index heavyweight and housing finance major HDFC shed 0.78% to Rs 1,106.90. The stock hit high of Rs 1,117.40 and low of Rs 1,098 in intraday trade.

Shares of companies engaged in exploration production of gas fell on reports that the government has reduced the cost of locally produced natural gas by about 20% for the six months period starting 1 April 2016. Cairn India (down 0.61%), ONGC (down 1.7%) and Oil India (down 0.52%) edged lower. Media reports suggested that the government has reduced the cost of locally produced gas by about 20% for the six months period starting 1 April 2016, compared with the previous six months period. Prices will be cut to $3.06 per million British thermal units (mmBtu) in the first half of the next fiscal year starting 1 April 2016, on gross heat value basis, reports suggested. It will cost about $3.4 per mmBtu on a net heat value basis compared with $4.24 per mmBtu for the period from 1 October 2015 to 31 March 2016, as per reports.

Index heavyweight Reliance Industries slipped 0.16% to Rs 1,043.20. The stock hit high of Rs 1,055.95 and low of Rs 1,034.10 in intraday trade.

Gas utility stocks rose on reports that the cut in gas price would reduce raw material costs and expand margins for gas utility firms. Indraprastha Gas (up 1.84%), Gujarat State Petronet (up 1.27%) and Gujarat Gas (up 2.71%) rose.

Private sector bank stocks were mixed. HDFC Bank (up 0.63%), Axis Bank (up 0.51%), IndusInd Bank (up 1.89%) gained. ICICI Bank (down 1.03%), Yes Bank (down 0.66%), Kotak Mahindra Bank (down 0.07%) fell.

PSU bank stocks rose. Indian Overseas Bank (up 2.9%), Vijaya Bank (up 1.44%), Canara Bank (up 1.68%), IDBI Bank (up 0.07%), Bank of India (up 0.83%) and Union Bank of India (up 1.24%) rose. Shares of Bank of Baroda ended unchanged at Rs 147.

State Bank of India fell 1.8% to Rs 194, after announcing lending rates based on marginal cost of funds to be effective from 1 April 2016. According to the announcement on the banks website, State Bank of India (SBI)s Marginal Cost of Funds based Lending Rate (MCLR) for overnight loans will be 8.95%, for one month will be 9.05% and for three months will be 9.10%. The MCLR on 6-month loans will be 9.15% and for one-year loans the rate would be 9.2%, the bank said. MCLR for two-year loans would be at 9.3% and loans with three-year maturity would carry an MCLR of 9.35%, the bank said.

As per RBIs new norms, which take effect from 1 April 2016, interest rate on advances will be based on marginal cost of funds.

Punjab National Bank fell 0.94% after the bank said that rating agency CARE has downgraded its ratings on the banks Tier I and upper Tier II bonds to CARE AA+ from CARE AAA, mainly on account of the impairments in the credit portfolio. PNB said it has not accepted the downward revision by CARE. The announcement was made after market hours yesterday, 30 March 2016.

Mahindra Mahindra (MM) fell 0.98%. MM during market hours today, 31 March 2016, announced its foray into the global combine harvester business, by entering into a strategic partnership with Sampo Rosenlew, a combine harvester company based in Pori, Finland. Under the transaction, which is expected to close by 30 June 2016, MM will acquire a 35% equity stake in Sampo Rosenlew. The two companies will work in tandem to grow their combine harvester business globally, MM said. Sampo Rosenlew had a stand-alone revenue of euro 93 million for the year ended 30 September 2015. The company is also a joint venture partner in a combine harvester company in Algeria, which had revenues of Euro 45 million in FY 2014-15.

Together with its existing strategy in the core markets, Sampo Rosenlew will also develop a new range of combine harvesters for developing markets and for specialty crops. Mahindra and Sampo Rosenlew will jointly focus on the combine harvester business in Asia, Africa and Eurasian Economic Union countries, MM said.

Dr Reddys Laboratories (DRL) was up 1.09% at Rs 3,045.90 after the company announced during trading hours today, 31 March 2016, that it has entered into a licensing agreement with Eisai Co., Japan by which Dr. Reddys will be granted exclusive worldwide development and commercialization rights (excluding Japan and Asia) for Eisais investigational anticancer agent E7777. Eisai will be responsible for the development and marketing of E7777 in Japan and Asia, while DRL holds the option for rights to develop and market the agent in India. In exchange of these rights, Eisai will receive milestone payments in line with obtaining marketing approval and the achievement of agreed upon sales targets. Through this agreement, the two companies aim to accelerate development and maximize the value of E7777.

Lupin rose 0.24% to Rs 1,478 after the company announced during trading hours today, 31 March 2016, that its US subsidiary, Lupin Pharmaceuticals Inc. has launched its Donepezil Hydrochloride Tablets, 23 mg in the United States. Lupins Donepezil Hydrochloride Tablets, 23 mg are the AB rated generic equivalent of Eisai Incs Aricept Tablets, 23mg. It is indicated for the treatment of dementia of the Alzheimers type. Aricept had US sales of $47.1 million (IMS MAT December 2015).

Most metal shares declined after global credit ratings agency Standard Poors (SP) cut the outlook on Chinas sovereign credit rating to negative from stable, saying the nations economic rebalancing is likely to proceed more slowly than the ratings firm had expected. NMDC (down 2.05%), Vedanta (down 1.96%), Bhushan Steel (down 1.51%), Tata Steel (down 1.2%), Steel Authority of India (down 0.69%), Hindustan Copper (down 0.1%) and Hindalco Industries (down 0.06%) edged lower. JSW Steel (up 0.42%), National Aluminium Company (up 4.18%) and Jindal Steel Power (up 4.42%) edged higher.

Over the next five years, China will show modest progress in economic rebalancing and credit growth deceleration, SP said. These expected trends could weaken the Chinese economys resilience to shocks, limit the governments policy options, and increase the likelihood of a sharper decline in trend growth rate, it said.

Meanwhile, copper edged lower in the global commodities markets. High Grade Copper for May 2016 delivery was currently down 0.73% at $2.174 per pound on the COMEX.

Hindustan Zinc surged 4.71% to Rs 183.40 after the company said its board of directors at a meeting held yesterday, 30 March 2016, declared special golden jubilee dividend of Rs 24 per share for the financial year ending 31 March 2016. The announcement was made after market hours yesterday, 30 March 2016. Shares of Hindustan Zinc offered a dividend yield of 13.7% based on the stocks closing price of Rs 175.15 on the BSE yesterday, 30 March 2016.

Tata Motors edged lower in volatile trade. The stock fell 0.24% to Rs 387.95. China is a key market for Jaguar Land Rover (JLR), which is owned by Tata Motors.

Saint-Gobain Sekurit India jumped 9.99% to Rs 40.75 after a massive bulk deal of 1.19 crore shares was executed on the scrip at Rs 41 per share at 09:33 IST on BSE.

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