SEBI has issued final guidelines on real estate mutual funds (REMFs). The schemes can be launched by existing mutual fund houses or firms that have been operating in the real estate space for at least five years. In addition to the dedicated infrastructure funds and real estate investment trusts, REMFs would be the third product for mutual funds in the real estate category. While the draft guidelines had been put on all the three, the closed-ended REMFs are the first ones to see the final guidelines coming in.
Besides directly investing in real estate, SEBI has also permitted investments in mortgage-backed securities, securities of companies engaged in dealing in real estate assets or in undertaking real estate development projects and other securities. However, it has mandated that at least 35% of net assets of the scheme should be invested directly in real estate assets. Taken together, investments in real estate assets, real estate-related securities, including mortgage-backed securities, shall not be less than 75% of net assets of the scheme. Caps will be imposed on investments in a single city (not more than 30%), single project (15%), equity or debentures issued by unlisted real estate companies (15% across all schemes and 25% of issued capital in a single scheme). The assets held by one scheme cannot be transferred to another.
However, REMFs cannot invest in vacant land, deserted land or land earmarked for agricultural use. The guidelines also suggest that the assets of real estate schemes be valued every quarter by two valuers. With this move, retail investors can invest in real estate as an asset class, which has a low correlation with equity and bonds, and enjoy the benefits of asset class diversification.
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Moderate provisioning and lower deposit growth helped the country’s second largest bank, ICICI Bank post a 39% rise in net profit for the fourth quarter ended March 31, 2008. The net profit rose to Rs 1,148.8 crore from Rs 825.1 crore in the comparable period. The bank’s net interest income for the fourth quarter grew by 29% to Rs 2,080 crore as against Rs 1,609 crore in the year-ago period. Non-interest income, which comprises both fee income and income from treasury operations, rose marginally by 12% to Rs 2,361 crore.
Rising interest rates seems to be taking a toll on the bank’s retail operations on both the assets and liabilities’ side. While deposits in the March quarter have grown by just 6% to Rs 244,431 crore, advances rose by around 15% to Rs 225,616 crore. Retail advances rose 3% to Rs 131,663 crore. The average net interest margin for the fourth quarter was at 2.4% as against 2.3% the previous year.
The net profit for the year rose 33% to Rs 4,157 crore as compared to Rs 3,110 crore in FY07. The bank has taken Rs 680 crore hit for the year on accounts of its overseas books. Following the $5bn raised in ‘07-08, the bank has managed to improve its credit-deposit ratio to 92% from 85% last year.
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Public sector National Aluminium Company Ltd (Nalco) has lined up a $1 billion investment to put up smelters (1.55 lakh tonne smelter in the first phase and another identical capacity smelter in the second phase) and a power plant (750MW gas based captive power plant) in Iran. This will be implemented in joint venture with Kerman Development Organisation, Iran. Nalco will have majority stake in the project along with management control.
Meanwhile, the metal refiner will complete its Rs 5,100 crore expansion of its domestic production facilities by end of current calendar. It would then ramp up bauxite mining capacity from 48 lakh tonne to 63 lakh tonne, alumina refinery to 21 lakh tonne from 15.75 lakh tonne, and metal production to 4.6 lakh tonne from 3.45 lakh tonne. It is estimated that, even after meeting the requirement of its smelters at home, Nalco will be left with a surplus of 1.2 million tonne of alumina for the export market. This surplus alumina would be sufficient to produce around 5 lakh tonnes of metal.
Nalco’s overseas investments are part of its strategic plan to convert its surplus alumina production into metal in geographies with lower energy costs. It has already signed a deal with the Indonesian government to invest $3.4 billion in setting up a 5 lakh tonne smelter in two phases and a 1,250 MW power plant. Investments in South Africa are also currently under consideration.
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