Aditya Birla Nuvo reported a 130 per cent dip in its consolidated net profit for the quarter ended June 30, 2008, mostly on account of higher losses in its life insurance business and investments in its BPO and garment retail businesses. The company reported a consolidated net loss of Rs 28.3 crore during the quarter, as against a profit of Rs 94.7 crore in the corresponding period last fiscal.
Its life insurance business reported a net loss of Rs 146.8 crore during the quarter from Rs 33.6 crore in the year-ago period, which was largely due to the growing share of new business premium. “The new business is fully profitable – however, income from it will accrue over the policy period, as is the case with the nature of this business. Higher spends on intensification of distribution network also affected profitability,” the company said.
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NTPC Ltd, Asian Development Bank (ADB), GE Energy Financial Services, Kyushu Electric Power Co and Brookfield Renewable Power will form a joint venture company to undertake renewable power generation.
The companies on Tuesday signed a Memorandum of Understanding (MoU) to form a joint venture company for generating renewable power. NTPC would hold a 40 per cent stake in the company while the remaining would be equally shared by other entities. The joi nt venture company would develop greenfield and under-utilised potential sites to establish 500 MW of renewable power generation sources in the country.
The company would seek to develop projects in the country and may consider investing abroad in the near future. Initially, the company would concentrate on wind power, mini and micro-hydro electric power. The Chairman of the joint venture entity would b e nominated by NTPC.
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On 29 July 2008, the Reserve Bank of India increased the repo rate by 50 basis points to 9 per cent. It also hiked the cash reserve ratio (CRR) by 25 basis points to 9 per cent beginning 30 August 2008.
While the repo rate hike is expected to make overnight funds costlier for banks, the CRR hike is expected to marginally reduce the lendable funds of banks.
Banks are aggressively using the repo facility of the RBI since the beginning of July. They borrowed almost Rs.38,900 crore per day from the RBI through its liquidity adjustment facility. Therefore the hike in the repo rate by the RBI will surely put some pressure on the cost of funds of banks.
The 25 basis points hike in the cash reserve ratio will suck out about Rs.8,000-8,500 crore of liquidity from the banking system. This will reduce the lendable resources of banks and, coupled with the repo rate hike, will bring the net interest margins of banks a bit under pressure.
Surplus liquidity in the banking system stood at a robust Rs.1,37,215 lakh crore as on 18 July 2008. About Rs.1,30,000 of this surplus liquidity comprises long term securities issued under the market stabilisation scheme. None of these securities are maturing before April 2009.
In this context, it may be noted that demand for credit remains high with credit growth well outpacing deposit growth. SCB credit is growing at around 25-26 per cent while SCB deposits are growing by around 21-22 per cent. According the disaggregated data from the monetary authority's quarterly review, growth in credit to industry accelerated further from 26.4 per cent a year ago to 26.9 per cent as on 23 May 2008. Growth in credit to small scale industries accelerated sharply from 29.5 per cent to 52.1 per cent during this period. However, the continuous rise in interest rates over the past one year did take its toll on personal loans. Growth in personal loans slowed from 23.9 per cent a year ago to 15.9 per cent as on 23 May 2008.
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