International Merger News - 1st March 2008

Thomson says Reuters takeover to close April 17

TORONTO (Reuters) - Electronic publisher Thomson said on Friday its takeover of financial data and news provider Reuters Group has now received all required antitrust and regulatory clearances and is expected to close on April 17.

Shareholders of both companies will vote on the deal at meetings on March 26 in London and Toronto, Thomson said.

(Reporters and editors involved in writing and editing this report may own Reuters securities and are bound by the Reuters Code of Conduct, which restricts dealing in securities in companies on which a journalist is reporting)

Source- reueters

 

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India Budget Imapct – 1st March 2008

India Budget – 2008 Impact – 1^st March 2008

 

*Union Budget 2008-09: Impact on IT/ITES/BPO sector

*Union Budget 2008-09: Social sector

*Union Budget 2008-09: Impact on banking sector

*Union Budget 2008-09: Impact on power sector

*Union Budget 2008-09: Impact on financial services sector

*Budget inclusive and balanced one: CII

*'Populist' PC does a poll vault

*Budget to stimulate investment, growth: Chidambaram

 

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Union Budget 2008-09: Impact on IT/ITES/BPO sector

IT/ITES sector will benefit largely because of increase spending on education, which will result in large talent pool of professionals. This spending on education will also help in reducing the supply side constraints that is currently faced by the leading companies in hiring quality professionals.

The service tax on customised software is a negative for technology companies but it will be passed on to the clients. (Full story)

 

 

Union Budget 2008-09: Social sector

Increase in provision for Bharat Nirman by 31.6 per cent from Rs 18,696 crore to Rs 24,603 crore.

Increase in provision for education by 34.2 per cent to Rs 32,352 crore.

Increase in provision for health and family welfare by 21.9 per cent to Rs 15,291 crore.

National Means-cum-Merit Scholarship scheme to be introduced to arrest drop- out ratio; selection through a national test from among students who have passed class VIII; each student to be given Rs 6,000 per year; 1,00,000 scholarships to be awarded every year.

Corpus fund of Rs 750 crore to be created this year. (Full story)

 

 

Union Budget 2008-09: Impact on banking sector

PSU banks are expected to face pressure on their net interest margins until the subsidy for waiver of agricultural loans and one time settlement of loans is released from the government.

The cost of adding more rural households in their rural branches may increase the operating cost for the PSU banks.

Including Indira Awas Yojana (IAY) houses under the differential rate of interest scheme at an interest rate of 4 per cent will increase the proportion of sub-PLR lending for the PSU banks. (Full story)

 

 

Union Budget 2008-09: Impact on power sector

Aggressiveness in allotting UMPPs to prospective bidders expected to speed up the generation capacity.

Setting up of a national fund for T&D reforms to provide a more focused approach.

Coal distribution policy and appointment of a coal regulator to bring regularity to the process of coal production and pricing. (Full story)

 

 

Union Budget 2008-09: Impact on financial services sector

No relief to the infrastructure financing sector in terms of tax rates.

Infrastructure financing companies to benefit under the public private partnerships proposed under various infrastructure schemes. The corpus for the Rural Infrastructure Development Fund will facilitate such PPP projects in the rural segments as well.

Companies that finance rural electrification will benefit from the additional subsidy offered to RGGVY. (Full story)

 

 

Budget inclusive and balanced one: CII

Puducherry: The Confederation of Indian Industry (CII) Puducherry, has described the union budget as `an inclusive and balanced` one

In a press release here today, CII chairman C Chinnasamy said that the budget has focussed on growth in crucial sectors like Agriculture, education, health and defence. The increased allocation of funds for these sectors and announcement of new schemes and projects would boost the economy, he said.

The hike in exemption limit in Income tax and also cut in excise duties imposed on cars would improve the lifestyle of the people, he said.

Vice Chairman of CII (Puducherry) Sriram Subramany however pointed out that the industry\'s expectation on some reduction in corporate tax in the budget had been belied.

He said all export companies also anticipated concessions in view of the rupee appreciation and global recession. This had not come true.

Subramanya said waiver of loans from farmers to the extent of Rs 60,000 crore was most welcome and also necessary. The raising of exemption limit for Income Tax assessees was also a step in the right direction as it would help the urban middle class people across the country, he said.

 

 

Budget to stimulate investment, growth: Chidambaram

New Delhi: Finance Minister P Chidambaram on Feb 29 said the Union Budget for 2008-09 would stimulate investment and consequently growth, while pointing out that he had done the best through the budgetary exercise by providing credit facilities to the farm sector. Credit is only one element of the story in the farm sector. I provided more credit. Budget can only address credit side and the farm sector has not done too bad this year, he said in his post-Budget comments. The Finance Minister had announced debt waiver and relief worth Rs 60,000 crore to small and marginal farmers in the Budget, the last full financial statement before the general elections in 2009. This Budget will stimulate investment and growth and that growth will create wealth. The economy is growing by eight per cent, people have become more tax compliant and they are willing to pay taxes, he said on the buoyancy in government's revenues.

 

         

'Populist' PC does a poll vault

New Delhi: The Finance Minister, making a populist move, raised the income tax exemption up to Rs 1.5 lakh for men and upto Rs 1.8 lakh for women. Senior citizens would now get tax upto Rs 2.25 lakh. However, there would be no change in the corporate tax.There would be no change in the STT rates, but short-term capital gain would now attract 15 per cent up from 10 per cent.

The Finance Minister said that there would be no change in peak customs duty; however, he reduced the excise duty to 14 per cent from 16 per cent.Customs duty on life saving drugs would now be 5 per cent and convergence products duty would be reduced to 5 per cent.The excise on small cars has also been reduced to 12 per cent from 16 per cent and that on two and three wheeler also by the same amount. Anti-aids drug would be exempted from excise duty.

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Birla Sunlife Equity - Analysis

Birla Sunlife Equity

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Investors can consider exposure in Birla Sunlife Equity as the fund continues to deliver consistent returns. It continues to find a place in the top quartile of the one-year performance chart of diversified funds. Its three and five-year returns of 45 per cent and 58 per cent, respectively, inspire confidence, having beaten the benchmark index — BSE 200 .

 

Suitability: The scheme's long record of accomplishment, steady performance after the takeover by Birla Sunlife (the fund was formerly under the Alliance banner) and flexibility to shift across various market-cap segments make it a suitable candidate for the core equity portfolio of a long-term investor.

Birla Sunlife Equity has, in recent times, shown higher volatility, especially on the downside. While in short corrections during 2004 and 2005 the fund declined as much as its benchmark, it declined steeper than its benchmark in the May 2006, February 2007 and the more recent January 2008 corrections. Investors may, therefore, consider routing their exposure through the systematic investment plan to enable cost averaging during volatile phases.

 

Performance: The fund has returned 36 per cent over the last one year, ahead of the category return of 29 per cent for the same period. It has also beaten its benchmark and the Sensex. That the fund is not among the top performers over the last one year does not appear to be cause for much concern for the following reason: funds that have topped the charts have either been theme funds or those with high concentration on some of the sectors that witnessed strong rally. Such funds have delivered super normal returns of 40-65 per cent while most diversified funds have returned lesser.

Birla Sunlife Equity has a portfolio of about 55 stocks.

While several of the stocks do appear richly valued (the portfolio price earnings multiple being 45), a good number of them hold promise over a one-two year period. Crompton Greaves, Thermax, Aban Offshore and Jagran Prakashan are such instances. Over 20 stocks, including the above, have remained in the portfolio for over a year, suggesting that the fund prefers a buy and hold approach in stocks with potential.

 

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DSP ML Opportunity Fund : Analysis

DSP ML Opportunity Fund

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Opportunities funds, powered by their fluid investment style, can target a wider range of investment opportunities to maximise growth. They have the mandate to invest across market capitalisations (large cap, small and mid cap stocks), asset classes (equities and debt instruments) and sectors. This provides the fund manager with the flexibility to invest across the spectrum of stocks and asset classes depending on the growth opportunities. The fund manager can take aggressive stock/sector bets in order to clock above-average returns.

Investors who are enamored by thematic funds (especially infrastructure funds) must not lose sight of the fact that diversified equity funds (which include opportunities funds) can make aggressive sectoral/thematic calls. More importantly, they can exit the sector/theme when valuations peak; this is something thematic funds cannot do because they are bound by their mandates to remain invested in the theme regardless of the valuations.

Equity Funds: Thematic vs Diversified

DSP ML Opportunities Fund, one of the oldest equity funds to pursue the opportunities style of fund management, is a leading fund from the diversified equity fund segment. Its impressive showing across the risk and return parameters over varying time frames and market cycles is noteworthy.

What DOF offers

DOF, an offering from DSP ML Mutual Fund is an open-ended, opportunities style fund. Launched in May 2000, the fund invests between 80 per cent -100 per cent of its corpus in equities while the rest (upto 20 per cent) can be held in debt/money market instruments. It pursues the growth style of investing by identifying companies that provide long-term capital growth opportunities from across the market and sectors.

Given its fluid investment style, the fund has an edge over regular diversified equity funds when it comes to investing aggressively in investment opportunities (most diversified equity funds can take moderate bets as opposed to the aggressive bets that opportunities funds can take). To that end, DOF is ideally suited for investors with an aggressive risk appetite.

How DOF fares vis-�-vis its peers

	NAV (Rs)	1-Yr (%)	3-Yr (%)	5-Yr (%)	Std. Dev. (%)	Sharpe Ratio (%)
ICICI Pru Dynamic Plan (G)	91.28	34.3	55.5	50.7	6.69	0.41
Franklin India Opportunities (G)	38.23	38.9	53.2	50.6	8.19	0.38
DSP ML Opportunities (G)	87.51	52.8	53.0	59.0	6.58	0.43
HSBC India Opportunities (G)	43.08	43.9	50.8	-	7.32	0.40
Principal Resurgent (G)	112.59	50.0	44.8	53.5	6.04	0.43
S&P CNX Nifty		45.6	45.4	40.4

 

Source: Credence Analytics. NAV data as on January 16, 2007.)

(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis- -vis those offered by a risk-free instrument)

For the purpose of peer comparison, we have considered funds with a similar investment proposition that have been in existence for atleast 3 years.

DOF's NAV (net asset value) delivers a competitive performance over the 3-Yr period (53.0 per cent CAGR). Over 5-Yr, its NAV has appreciated by 59.0 per cent CAGR. Its performance over 1-Yr (which is not the best time frame for evaluating equities) is just as notable (52.8 per cent). Although, ICICI Pru Dynamic Plan (55.5 per cent CAGR) and Franklin India Opportunities (53.2 per cent CAGR) have outperformed DOF over the 3-Yr time frame they have been comprehensively outperformed over the other time frames. Moreover, when compared to DOF, their performance falters on the risk-return parameters (more on that later).

It is noteworthy that DOF has successfully outperformed its benchmark index i.e. S&P CNX Nifty across the 1-Yr, 3-Yr and 5-Yr time frames.

Volatility

With a Standard Deviation of 6.58 per cent, DOF has an impressive showing on the volatility control front. This means that the fund has exposed investors to lower risk levels vis- -vis peers. Among peers, Principal Resurgent (6.04 per cent) pitches in the best performance, while Franklin India Opportunities (8.19 per cent) fares the worst.

Risk-adjusted return

Sharpe Ratio is a measure of the returns delivered by the fund per unit of risk borne. DOF (Sharpe Ratio 0.43 per cent) and Principal Resurgent (Sharpe Ratio 0.43 per cent) are the best performers, whereas Franklin India Opportunities (Sharpe Ratio 0.38 per cent) has posted the most dismal performance.

As can be seen in the graph, DOF has outperformed its benchmark i.e. S&P CNX Nifty over the long-term. Rs 100 invested in DOF on inception would be worth approximately Rs 942.8 at present; whereas an investment in the benchmark index would have yielded only Rs 441.1.

Fund management approach

DOF belongs to a fund house that is known for its process-driven investment approach.

The fund house has well-defined investment processes in place which ensure two things

a) the fund delivers a predictable performance across market cycles and b) it is not overly dependent on any individual (read fund manager) for its success. The performance of funds like DSP ML Top 100 (a large cap fund) and DSP ML Equity Fund (a value-style fund) and DSP ML Balanced Fund under various fund managers bear testimony to this fact.

What should investors do?

Now the big question - should an investor consider investing in DOF? Well, that would depend on his risk appetite, investment objective and existing portfolio, among a host of other factors. At Personalfn, we have always maintained that a 'one size fits all' approach doesn't work while investing. An investment avenue that is apt for one investor could be grossly unsuitable for another. Therefore, investors would do well to consult their investment advisors/financial planners to determine the suitability of DOF in their portfolios.

Source – BS

 

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A simple comparison of tax calculation on Pre & Post Budget basis

A simple comparison of tax calculation on Pre & Post Budget Basis

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Annual Income	Tax liability
	Individuals		Women (below 65 years)		Senior Citizen
	Pre- budget	Post-budget	Pre-budget	Post-budget	Pre-budget	Post-budget
110,000	-	-	-	-	-	-
145,000	3,605	-	-	-	-	-
150,000	4,120	-	515	-	-	-
195,000	13,390	4,635	9,785	1,545	-	-
200,000	14,420	5,150	10,815	2,060	1,030	-
250,000	24,720	10,300	21,115	7,210	11,330	2,575
300,000	40,170	15,450	36,565	12,360	26,780	7,725
400,000	71,070	36,050	67,465	32,960	57,680	28,325
500,000	101,970	56,650	98,365	53,560	88,580	48,925
600,000	132,870	87,550	129,265	84,460	119,480	79,825
700,000	163,770	118,450	160,165	115,360	150,380	110,725
800,000	194,670	149,350	191,065	146,260	181,280	141,625
900,000	225,570	180,250	221,965	177,160	212,180	172,525
1,000,000	256,470	211,150	252,865	208,060	243,080	203,425
1,100,000	316,107	266,255	312,142	262,856	301,378	257,758
1,200,000	350,097	300,245	346,132	296,846	335,368	291,748
1,500,000	452,067	402,215	448,102	398,816	437,338	393,718
2,000,000	622,017	572,165	618,052	568,766	607,288	563,668
2,500,000	791,967	742,115	788,002	738,716	777,238	733,618
3,000,000	961,917	912,065	957,952	908,666	947,188	903,568
3,500,000	1,131,867	1,082,015	1,127,902	1,078,616	1,117,138	1,073,518
4,000,000	1,301,817	1,251,965	1,297,852	1,248,566	1,287,088	1,243,468
4,500,000	1,471,767	1,421,915	1,467,802	1,418,516	1,457,038	1,413,418
5,000,000	1,641,717	1,591,865	1,637,752	1,588,466	1,626,988	1,583,368
5,500,000	1,811,667	1,761,815	1,807,702	1,758,416	1,796,938	1,753,318
6,000,000	1,981,617	1,931,765	1,977,652	1,928,366	1,966,888	1,923,268
6,500,000	2,151,567	2,101,715	2,147,602	2,098,316	2,136,838	2,093,218
7,000,000	2,321,517	2,271,665	2,317,552	2,268,266	2,306,788	2,263,168
7,500,000	2,491,467	2,441,615	2,487,502	2,438,216	2,476,738	2,433,118
8,000,000	2,661,417	2,611,565	2,657,452	2,608,166	2,646,688	2,603,068
8,500,000	2,831,367	2,781,515	2,827,402	2,778,116	2,816,638	2,773,018
9,000,000	3,001,317	2,951,465	2,997,352	2,948,066	2,986,588	2,942,968
9,500,000	3,171,267	3,121,415	3,167,302	3,118,016	3,156,538	3,112,918
10,000,000	3,341,217	3,291,365	3,337,252	3,287,966	3,326,488	3,282,868

Note: Surcharge @ 10% has been added for income above Rs 10 lakh. All income slabs are subject to education cess @ 3%.

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