LIC to invest Rs 400 cr in 50-storey office building

LIC will be investing an estimated Rs 400 crore, including the land cost, in constructing a 50-storey office building, the tallest in Eastern India, Mr R.R. Dash, LIC’s Zonal Manager, said here.

LIC had won the bid for acquiring a five-acre plot opposite Science City at Rs 276.2 crore from the Kolkata Municipal Corporation, in what turned out to be one of the costliest land deals in the region at the time.

The proposed building will comprise 7 lakh square feet of rented area, Mr Deb Kumar Banerjee, LIC’s Chief Engineer said. The corporation is expected to earn a rent of around Rs 12 crore per month from the building. “We are expecting a rent of Rs 150-170 per square foot per month when the tower comes up. It is going to be a 150 metre high building, the highest in Eastern India,” he said.

The corporation is in the process of finalising a number of consultants for the project, he added. “Fourteen have been shortlisted. We will choose the final consultants in three months time,” Mr Banerjee said. There can be more than one consultant for the project including a few international consulting companies, he added.

The building may be rented out for malls, offices, IT-ITES companies.

Potato king J.R. Simplot, U.S. fry innovator, dies

J.R. Simplot, the billionaire founder of the Boise, Idaho-based agriculture business that bears his name and who helped make French fries a staple of the American diet and waistline, died on Sunday at the age of 99, officials said.After pioneering the first commercial frozen French fry in the late 1940s, Simplot eventually became a major supplier of Idaho potatoes to McDonald’s, Burger King and Wendy’s. His privately held company, where he was chairman emeritus, reported $3.3 billion in sales in 2006.

An official at the Ada County Coroner’s office said Simplot died at home on Sunday morning of natural causes.Born John Richard Simplot in Dubuque, Iowa in 1909, he left school at the age of 14 to work in the agriculture storage and distribution business. He started his first produce company in 1929, and eventually became a major supplier of dehydrated potatoes to the U.S. military during World War II.In the late 1940s, Simplot’s researchers began experimenting with frozen potato products. His company began producing frozen French fries in Idaho in 1946 and the business thrived with the spread of freezers into American homes.

Simplot’s most well-known business venture began with a handshake. In 1967, Simplot and McDonald’s founder Ray Kroc shook hands and agreed the Simplot Company would provide frozen French fries to the expanding fast-food chain.The company expanded to several potato processing plants in Idaho, Oregon and Washington, and eventually Australia and China. It now grows and processes many other vegetables.The postwar spread of processed American fast food has had a significant impact on the nation’s health, with the popularity of such food contributing to an obesity epidemic.

The Simplot company also operates a feedlot business, with operations in Idaho and Washington turning out about 400,000 head of cattle per year.The company owns and operates fertilizer manufacturing plants in Idaho, and a Simplot company called Grower Solutions has about 70 stores selling agricultural products in the West.In 2001, the plain-spoken businessman told Esquire Magazine luck had nothing to do with his success. "Work honestly and build, build, build. That’s all I can tell you," he said.In 1973 Simplot retired from his company, but remained chairman of the board. He stepped down from that post in 1994 after his children Gay, Don and Scott were named to the board of directors, but retained the title of chairman emeritus.

In 1980, he provided seed money to a small Boise-based computer chip manufacturer, Micron Technology. Micron is now one of Idaho’s largest publicly traded companies.A well-known figure in Boise, Simplot was often seen driving through town in a Lincoln Town Car with license plates that read "MR SPUD."In an interview for the company in 1992, Simplot said he didn’t care how he would be remembered. "Oh hell, I don’t care what they say about me," Simplot said. "I’m not a publicity hound."

RBI: fiscal deficit among highest in world

India’s fiscal deficit continues to be among the highest in the world and underlying pressures are not entirely showing up in headline fiscal numbers, Reserve Bank of India Governor Yaga Venugopal Reddy said on Monday.

India aims to bring down its fiscal deficit to 2.5 percent of GDP for the 2008/09 year compared to 3.1 percent in 2007/08.

India’s fiscal deficit continues to be high and the pressures on the measure are not reflected in the data, Reserve Bank of India Governor Yaga Venugopal Reddy said in New Delhi.

Replicating PMS products for small investors

SEBI recently directed Portfolio Management Services (PMS) firms not to operate pooled accounts. These firms can henceforth offer only separately-managed accounts to their clients. The capital market regulator has also increased the minimum networth required for PMS firms, from Rs 50 lakh to Rs 2 crore.

Both these directives could compel PMS firms to increase the minimum investment size for clients to economise their operations. Importantly, SEBI’s directives could lead to gradual closure of boutique investment firms. These are small-sized PMS firms that have the potential to offer custom-tailored products to small investors. So, where does this leave this class of investors?

This article suggests that portfolio advisors and mutual funds can work together to replicate PMS-style products for small investors. Specifically, portfolio advisors can add value with their manager selection skills — selecting mutual funds in each style universe to construct a portfolio of mutual funds. These advisors can also employ their security selection skills for investors who prefer self-managed custom-tailored portfolios.
Custom-tailored portfolios

PMS firms typically offer custom-tailored portfolios to HNIs. The process starts by risk-profiling the investor. A risk-profile process would probe into areas ranging from whether an investor likes bungee jumping to whether she prefers to invest in term deposits! This process is expected to help the portfolio manager arrive at the client’s risk appetite.

The portfolio manager and the investor then draft the investment policy statement. This statement includes the investment objectives, the expected return, the time horizon, frequency for rebalancing the portfolio and other constraints that the investor may impose. One such constraint may be not taking exposure to companies manufacturing products that harm the environment.

The portfolio manager would custom-tailor a portfolio based on the client’s risk-return preferences. A PMS firm operating pooled-account cannot offer a custom-tailored portfolio as a firm that operates separately-managed account. In some ways then, a PMS operating pooled-account is similar to mutual funds. It is, perhaps, for this reason that SEBI has directed PMS firms not to operate such accounts.

Market for structured products

Mutual funds do not offer custom-tailored portfolios to investors. An asset management firm floats a fund and collects moneys from investors. Often, mutual funds do not clearly disclose the investment style in the offer document. An investor could be, therefore, unintentionally overexposed to an investment style. An investor may, for instance, have exposure to four funds ranging from Opportunity Fund to Equity Growth Fund but with same investment styles.The mutual fund industry has to shed the habit of offering same-genre funds with different names and instead focus on offering newer-generation products.PMS firms’ offer structured products to their clients. Capital guarantee with upside participation in the stock market through exposure in large caps is one such product. Mutual funds should increasingly offer such products so that small investors can construct a style-diversified portfolio that meet their long-term investment needs.Some asset management firms are gradually venturing towards hedge-fund replication products and other structured products. Lotus India Long Short Equity, for instance, is a market-neutral fund that proposes to generate returns on the long and short side of the equity market.The SEBI directive on pooled accounts provides an incentive for mutual funds to offer more such structured products to cater to the broader needs of small investors.

Replicating PMS

Portfolio management is a two-step process in a PMS firm that operates separately-managed accounts. The first step is drafting the investment policy statement. The second step is the portfolio construction process. In a PMS-style replication process, the investment policy statement will be drafted by a portfolio advisor. The portfolio construction process will be facilitated by the advisor and executed by the investor.Specifically, the portfolio advisor would help the investor choose mutual funds that will optimally suit her risk-return preferences. This process involves first choosing various investment styles and then selecting funds in each style universe. The portfolio advisor performs a similar role as a fund-of-funds manager in that she employs her manager-selection skill. The advisor would also recommend individual stocks for those clients who prefer to take direct exposure in equity. These are clients who want custom-tailored portfolios.

The portfolio will be rebalanced at periodic intervals depending on the investor’s needs. The portfolio advisor will receive a fee for providing the advisory services - this will typically be a percentage of the total assets advised.

The primary difference in case of advisory services is that the client maintains her own trading P&L account. In the case of the PMS, the firm provides a monthly performance report to the investor.

The SEBI directive on pooled accounts is a welcome move in that it will increase demand for portfolio advisory services. And if such services take off, the mutual fund industry will be a major beneficiary.

Oil extends gains on supply concerns, weak dollar

Oil rose towards $133 a barrel on Monday, extending the previous session’s gains, due to a supply outage at the large Statfjord oilfield in the North Sea and a weak U.S. dollar.U.S. light crude for July delivery rose 40 cents to $132.59 a barrel by 0017 GMT. It settled up $1.38 at $132.19 a barrel on Friday after striking a record high of $135.09 in intraday trade last week.

London Brent crude rose 30 cents to $131.87."The market is continuing to focus on supply side concerns and the outage at Statfjord fields is an issue," said Gerard Burg, a commodities analyst at the National Australian Bank.Analysts said continued weakness in the U.S. dollar was also supporting oil’s rise.An oil spill at Statfjord shut about 138,000 barrels per day of production on Saturday and triggered the evacuation of workers, operator StatoilHydro said.StatoilHydro said on Sunday the oil spill had been cleaned up, all workers had returned to the platform and preparations were under way to restart production.

Worries that supply would struggle to keep up with demand over the next few years also supported prices.

OPEC Secretary-General Abdullah al-Badri said on Friday he was not worried about reports of faster-than-expected depletion in the world’s biggest oil fields and repeated his position that runaway oil prices were caused by speculation and not by supply problems. A Reuters survey last week showed that non-OPEC production had stagnated and would remain below 50 million barrels per day this year. Oil prices have climbed by around a third since the start of the year as investors seeking a hedge against inflation and the falling U.S. dollar pile into commodities.

Analysts said concern that record oil prices could dent global demand was the key downside risk.

European Central Bank President Jean-Claude Trichet said the potential economic fallout from financial market turmoil, along with rising food and commodity prices, could shock the economy further, while Vice President Lucas Papademos said inflation pressures had intensified due to rising oil prices, which were also dampening growth. In the U.S., data released on Friday showed that highway miles driven in March fell 4.3 percent from a year earlier, the first time this has happened in March since the last major oil shock in 1979.Road travel during the Memorial Day holiday over the weekend was expected to be 1 percent lower than last year, the first such decline since 2002.Crude oil speculators on the New York Mercantile Exchange trimmed net long positions last week, according to data from the Commodity Futures Trading Commission released on Friday.

Net long positions fell to 50,060 in the week to May 20 from 71,767 the previous week.

Equities open in red, Reliance Comm falls

Indian shares opened down 1.1 percent on Monday, tracking regional Markets that fell on worries about rising inflation and record high oil prices, and shares in Reliance Communications fell on news it was in talks with South Africa’s MTN Group.

Reliance Communications opened down 1.3 percent at 565 rupees after it said it was in exclusive talks with MTN, while bigger rival Bharti Airtel opened 3.1 percent higher at 862.50 rupees after saying at the weekend it had ended takeover talks with MTN.

At 9:57 a.m., the 30-share BSE index was down 1.36 percent, or 226.17 points, at 16,423.47, with Bharti Airtel the only stock to rise.

The broader 50-issue NSE index was down 1.33 percent at 4,881.00 points.

Bharti Airtel went up 4% in early trade after the deal has cancelled with MTN, South African telecom company.

Bajaj Finserv listed at Rs 545 and Bajaj Auto at Rs 725 after scheme of demerger.

Take Solutions board approved 10-for-1 stock split. The stock was up marginally.

Asian markets were trading lower. Shanghai Composite was down 2.59% or 89.89 points at 3,383.20. Hang Seng fell 2.01% or 496.81 points at 24,217.26. Nikkei 225 Average slipped 260.33 points or 1.86% at 13,751.87. Jakarta Composite was down 38.24 points or 1.55% at 2,427.71. Straits Times fell 0.77% or 23.99 points at 3,098.16. Seoul Composite went down 1.49% or 27.17 points at 1,800.77. Taiwan Weighted fell 0.74% or 65.36 points at 8,769.37.

US markets stocks fell on concerns about a worsening housing recession and rising crude prices put renewed pressure on a market besieged by worries that inflation will crimp consumption and further weaken the economy. The Dow plunged 145.99 points, or 1.16%, to 12,479.63. The Standard & Poor’s 500 index declined 18.42 points, or 1.32%, to 1,375.93, and the Nasdaq composite index fell 19.91 points, or 0.81%, to 2,444.67.

Indiabulls Trust plans $287 mln in S'pore IPO - source

Indiabulls Properties Investment Trust plans to offer shares within a S$1-S$1.10 price range, to raise up to S$389 million ($287 million) in a Singapore listing, a source briefed on the deal said on Monday.

The projected yield for the trust, sponsored by India’s fourth-largest developer by market value Indiabulls Real Estates, is 4.66-5.12 percent based on forecast income for the year ending March 2009, the source told Reuters.

The group will sell 353.5 million share in the initial public offering, which would be the first test of investors’ appetite for new listing of a real estate investment trust (REIT) since the market went cold in November.

Sources had told Reuters earlier this month that Indian developer DLF Ltd DLF would revive and enlarge an IPO of its property trust in Singapore to raise over $2 billion, likely in June, because it believes market conditions have improved.

However, ratings agency Moody’s only last week had issued a negative outlook rating for Singapore’s REITs over the next 12-18 months, citing weak market sentiment and tighter market liquidity that have impaired their access to capital markets.

Deutsche Bank and Merrill Lynch are handling the deal, which will see Indiabulls inject into the trust two projects with a total of 3.4 million square feet of space, said its prospectus filed earlier this month.

The Mumbai properties, One Indiabulls Centre and Elphinstone Mills, due to be ready by August, are designed for IT and financial firms and retail outlets, and has residential components.

The last two REITs to list in Singapore, Lippo-Mapletree Indonesia Retail Trust on Nov 19 and Saizen REIT on Nov 9, tanked on their debuts and are still trading as much as 31 percent below their IPO price.

The poor market conditions sparked by the U.S. subprime credit crisis had caused Indiabulls, and fellow Indian developers Unitech and DLF, to postpone their planned Singapore REIT IPOs in March.

Analysts say the credit turmoil may force Singapore’s once-booming REIT sector -- which has 20 listed property trusts -- to consolidate in coming months as financially weaker players sell assets or merge with their counterparts.

Rupee weakens as Asian stocks sag

The partially convertible rupee eased on Monday, as losses in Asian stocks and worries about rising inflation and slowing growth at home weighed on foreign investor appetite for local stocks.

* At 9:04 a.m., the rupee was at 42.76/77 per dollar, weaker than 42.69/70 per dollar on Friday. It hit a low of 43.21 last week, a level it last traded in early April 2007.

* Asian stocks fell more than 1 percent on Monday, with regional shares outside Japan hitting a 1-month low, as investors feared rising inflation and sluggish U.S. economic growth would seriously dent consumer demand.

* Annual inflation topped 8 percent in March for the first time in 3-½ years, revised data for March 15 showed on Friday, and analysts said a looming fuel price rise could push it closer to double digits.

* Foreigners have sold more than $3 billion of Indian stocks so far this year and the benchmark stock index is down 18 percent in 2008. Foreigners bought $17.4 billion of stocks in 2007, when the stock market rose 47 percent.

Reliance May Combine With MTN After Bharti Pulls Out

Reliance Communications Ltd., India’s second-largest mobile-phone company, may combine its operations with MTN Group Ltd. after the South African operator’s talks with Bharti Airtel Ltd. collapsed.

Reliance has exclusive negotiating rights with MTN for as long as 45 days, the Mumbai-based company said in an e-mailed statement today. There is no certainty on the completion or the timing of any agreement, it said.

An agreement would help Reliance Chairman Anil Ambani form an operator with a combined market value of more than $65 billion and offer mobile-phone services to 1.7 billion people stretching from the Cape of Good Hope to the Himalayas. New Delhi-based Bharti said on May 24 it ended talks with MTN after failing to overcome differences over control.

``Reliance may be one company that could possibly do it,’’ Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Mumbai, said by phone after Bharti’s announcement. ``If it was tough for Bharti, it will be tough for other Indian companies.’’

Reliance began talks to buy a majority stake in MTN, the Business Standard reported on its Web site on May 24, citing people it didn’t identify