spoutable

Monday 9 October 2017

SOEs find last resort for financing in capital market

Amid slower expansion in the banking industry, State-Owned Enterprises (SOE) Minister Rini Soemarno has pushed SOEs to raise funds from the capital market to oil the country’s ambition for infrastructure, despite Finance Minister Sri Mulyani Indrawati’s warning over state power firm PLN’s excessive debts.
PLN, the country’s most indebted SOE, is maintaining its plan to issue Rp 2.5 trillion (US$185 million) in bonds in October, part of a group of SOEs set to raise a total of Rp 31.87 trillion in proceeds, consisting of Rp 22.1 trillion in bonds and Rp 9.77 trillion in equity issuances, in the remaining months of the year.
Rini said the capital market could support government programs such as toll-road development and the ambitious 35-gigawatt electricity program. From September 2014 to September this year, SOEs built 560-kilometers of toll roads and saw 46 percent progress in power plant construction.
“Infrastructure projects need a lot of money, so we need to seek funds from both domestic and global markets,” she said on Thursday.
Rini believes such moves would not lead to the crowdingout effect, where an oversupply of bonds would force issuers to set higher interest rates to attract investors, as the SOEs had diversified the instruments.
After PLN and toll road operator PT Jasa Marga launch their asset-backed securities in the third quarter, the two firms will issue rupiah-denominated bonds worth Rp 1.5 trillion and Rp 2.5 trillion, respectively, in the fourth quarter.
Within the same period, Jasa Marga along with construction company PT Wijaya Karya are set to launch “komodo bonds” in November. They will be the first rupiah-denominated global bonds to be listed on the London Stock Exchange.
“Komodo bonds enable SOEs to access global financing without increasing currency risk exposure,” Rini said.
Next, she said the ministry would securitize hotels and properties under PT Patra Jasa’s management into a real estate investment trust (REIT). “Other than Patra Jasa, we will also securitize the development of a new town in Walini, West Java, into a REIT,” she said, adding that the 10,000-hectare town will use agricultural land managed by PTPN VIII.
Previously, the SOE Ministry’s undersecretary for company restructuring and development, Aloysius Kiik Ro, said from January to November, the bond issuance of SOEs had reached Rp 96 trillion. With the additional Rp 22.1 trillion financing in the fourth quarter, the bond issuance of SOEs would reach Rp 118.1 trillion in 2017.
“The bond emissions for 2018 will be around Rp 110 trillion as well. Indonesia needs Rp 1.1 quadrillion for infrastructure annually,” Aloysius said.
The aggressive fund-seeking of SOEs, however, has created worry over piling debt. Sri Mulyani recently expressed concern over PLN’s debt.
“PLN’s debt service coverage ratio [DSCR] is only 0.79, which is lower than the 1.5 required by the World Bank’s debt covenant,” she said. DSCR is a ratio of cash flow to debt interest and principal payments.
PLN president director Sofyan Basir said his company could reach the required ratio by the end of the year through efficiency programs that had until now helped saved Rp 42 trillion. “We can fulfill the covenant as its deadline is in December, so why should we raise the issue now? There are two months left,” he said.

Here’s why international football matters

THIS is why international football matters. Forget the apathy of English attitudes. Forget Wembley’s empty seats, bored minds and paper aeroplanes. Forget, even, the possibility of a £10million qualification windfall, as helpful as that is for Wales and the Republic of Ireland.
Here at Cardiff City Stadium tonight, it is about dreams, about desire. With no Gareth Bale — injured but, tellingly, with the squad — the only player involved in the Champions League this season is 17-year-old Ben Woodburn. Indeed, more than half play outside the Premier League.
The World Cup is what it always used to be and always should be — the pinnacle. There will be no apathy, no wondering how much more must be endured before domestic action returns. And there won’t be any empty seats.
Chris Coleman, the Wales boss, opted for fighting talk. ‘I don’t think it will be one of those fights where we are jabbing at each other — both teams will be going for it,’ he said. ‘It will be toe to toe, end to end, lots of contact. It will be exciting. I’ve always wanted to be in these games where everything is on it and all eyes are on you.’
That never used to be the case for Wales, not before Euro 2016. Ireland also enjoyed last summer’s finals in France, but they haven’t played at a World Cup since 2002. Manager Martin O’Neill has told his players they should not die wondering what that experience would be like, but first they must embrace what has the potential to be a career-defining 90 minutes.
This fixture is the most absorbing of the entire international break, an intrigue amplified by the mere 182 miles which separate their capital cities. It is the play- off before the play- off, the one- off gunfight before the two-legged battle. This has not happened by default. Wales won their last three to get in this position, while Ireland would not be here without a valiant victory in Austria. From Belgrade to Tbilisi and via Vienna and Chisinau in between, this campaign has been hard-fought for both nations. Every match matters. Players risk the wrath of club bosses when niggles and knocks are ignored. For them, this is their pathway to the biggest stage.
‘ International football, no matter who you play for, should always be exciting because you are representing your country,’ said Coleman. ‘It should not be looked upon as something of a hindrance.’
Coleman’s late father, Paddy, was born in Dublin and Ireland boss Jack Charlton made an approach to the defender in 1994. Had he said yes he would have gone to the World Cup that year. Coleman, though, wanted to achieve that with the country of his birth. Some 23 years on from Charlton’s proposition, he is still trying to make his first finals.
There have been so many permutations as to how these nations can advance to next month’s play- offs that both camps could do with a mathematician on the bench this evening.
Things are simplified by the need for victory. Ireland have been in this situation as recently as their final group match at the European Championship. They beat Italy 1-0, a euphoric night which served as reward for the hard miles of qualification. It is memories such as that which led O’Neill to declare: ‘I’m surprised by the negativity and thoughts that international football doesn’t matter. This is the biggest competition in the world.’
There are 6,000 Ireland fans in Wales; half of those are still trying to find a ticket. The black market will be a street auction. Even the family and friends of those involved are scrambling around for a way in.
Tonight in Cardiff is why international football still matters.

Watch this - it’s the fanciest new way to pay

A FLICK of the wrist is all it takes to pay at the checkout now.
Forgetting your wallet or phone is no longer a concern if you need to make a quick onthe-spot purchase.
I recently jumped on board the ApplePay bandwagon and now feel pretty clever paying by phone at the checkout – it still manages to draw some attention from onlookers.
So why stop there? I thought I’d give the newest payment technology to hit the streets in the form of Fitbit Pay a go.
They’re the latest company to join the contactless payment bandwagon, but you do need their new Iconic Watch to get cracking.
ANZ is one of several Australian lenders to roll out the new latest technology this month, giving customers yet another payment option other than cash, card or phone.
I love to run so leaving home without having to carry a heavy smartphone is ideal for any dedicated fitness fanatic who at the end of a session needs to grab a coffee or bottle of milk from the corner store.
Sticking notes into my top or having the jiggling sounds of coins in my back pocket is irritating, so going completely cash free can make life easier.
With payment information linked up to the watch it’s ready to roll, all it requires is a fourdigit PIN each day so it’s active and ready to be used at the checkout for the next 24 hours.
If I remove the watch during the day it will prompt me again for my PIN once it’s back on my wrist – a good way to deter any crims On my first go I forgot to flip my wrist upside down so the watch face is over the payment reader – this is important, otherwise it won’t work.
An onlooker was quick to quiz me about what I was doing, eager to know how the watch works and what happens if it gets stolen.
Its payment capability can be deactivated through the ANZ app and if it’s off my wrist it won’t work anyway.
So it’s already a good conversation starter.
It’s as quick and easy to use as most “tap and go” card payments and at no time did I find it failed once I got into the swing of flicking my hand over at the point of sale.
While shoppers may be a little anxious to use it at first, for the sporty ones it’s sure to be popular, they will love the fact that they don’t have to carry money anymore when doing their daily exercise routine.
Now it’s just a matter of time to see if people take it up.

Sydney’s biggest names make historic call for government to keep daring to build & innovate


THE state’s most high-profile corporate and community leaders have today come together in a historic call to compel the Berejiklian government to keep building, keep innovating and keep thinking big when it comes to our future. “Your government dramatically changed the course of our history for the better,” the letter — signed by the heads of the Business Council of Australia, the Sydney Opera House, the University of Sydney, the Museum of Contemporary Art and Harvey Norman among others — says. But, it also warns “the job is only half done”.
Amid fears of development fatigue among voters, the open letter asks if the state government wants a “nearenough-is-good-enough version of Sydney” or “the best city in the world”. “We believe the best is yet to come — if we stay the course,” the signatories, which also include SCG Trust chair Tony Shepherd, former NSW Premier Nick Greiner and Crown Resorts executive chair John Alexander, say. The landmark move coincides with the launch of The Daily Telegraph’s Bradfield editorial campaign, which will focus on efforts to build a new Sydney and unearth the city’s greatest needs.
SOME of the biggest names in Sydney business, sport and culture have today fired off a strong message to Gladys Berejikilan’s government, saying: The pain of building our city is worth it.
Amid Sydneysiders’ growing fatigue at the constant din of construction, a formidable list of high-profile corporate and community leaders have penned an open letter urging the Premier to keep a longterm view, warning “the job is only half-done”.
Strongly backing the ambitious infrastructure plan, the letter urges the state government to “stay the course” and “complete the vision”.
Joining forces to sign the letter are the heads of the Business Council of Australia — on behalf of the chief executives of some of Australia’s biggest employers — Sydney Opera House, Roads Australia, Infrastructure Partnerships Australia, Cricket NSW, the Australian Rugby Union, the University of Sydney, the Sydney Business Chamber, the Museum of Contemporary Art and Harvey Norman.
They stand with developers, consultants, hotel operators and casinos to applaud the sale of the state’s electricity assets, which delivered the unprecedented windfall that led to the infrastructure boom, and urging the government to weather criticism in the name of progress.
“Your government dramatically changed the course of our history for the better ... We have made huge strides since then, with ambitious projects that show the world our city means business,” the letter states. But it warns: “The job is only half-done.”
The missive coincides with the launch today of The Daily Telegraph’s Bradfield campaign, which will focus on efforts to build a new Sydney and unearth plans to address the city’s greatest needs.
A record $81.5 billion will be spent on new infrastructure over the next four years in the city’s most concentrated construction program since white settlement in 1788.
A long list of new roads, railway lines, schools, hospitals, sporting stadiums and a long-awaited second airport will generate nearly 150,000 new jobs and bring $149 billion in long-term benefits.
But the state government has faced a strident backlash since unveiling tens of billions of dollars in projects including WestConnex and the CBD light rail.
Sydneysiders, fed up with sudden road closures, traffic jams and clogged public transport, are taking to social
media to voice their irritation. And there are signs the building momentum could be 8691 JOBS slowing ahead of the next state election in two years.
Local business groups were surprised when the state Budget failed to commit funding for the Metro West link between the CBD and Parramatta. Finance to overhaul the state’s stadiums has also been limited.
“It feels like a rough road ... Opposition from NIMBYs
and naysayers has flared. Protests have threatened train lines, trams, motorways, hospitals, schools, cruise terminals, museums, sporting stadiums and (the) second airport that are critical to our prosperity” the open letter states.
“We ask you to continue on the path to transform Sydney, in the face of the many challenges. Changes that we will be celebrating in 100 years. Disruption is painful but necessary.
“Do we want a nearenough-is-good-enough version of Sydney, or do we want the best of every city we love, in the best city in the world?”
Western Sydney Business Chamber director David Borger has long campaigned for the western Metro.
“If we don’t get this project done we will be forcing people onto trains with Japanesestyle guards,” Mr Borger said.
“At the moment we don’t have a budget, a start date or a business plan. The government needs to put an express stamp on it right away.”
Other projects that remain in the “planning” phase despite commitments to begin building include the M12 and F6 motorways, Allianz Stadium upgrade and Northern Beaches and Western Harbour tunnels.
Opposition Leader Luke Foley has warned that Sydneysiders will “pay through the nose’’ via higher tolls and public transport fares. He said greater scrutiny over government spending was needed or “the public will end up paying for the cost blowouts that have arisen from poor management and waste”.
Business Council of Australia chief executive Jennifer Westacott said: “Under the leadership of Gladys Berejiklian, first as Treasurer and now as Premier, this state has
shown what a government can achieve when it demonstrates persistence, vision and discipline on infrastructure.
“Future generations of Australians reflecting on this period will honour this government for getting Sydney back on its feet and investing to make it a world-class city.”
Bradfield Governors chair Tony Shepherd said: “The state government has been instrumental in keeping going not just NSW but the whole country post-mining boom investment ... it is important for the state and the country that they keep going.”

Trump talks up action

US President Donald Trump said at the weekend that diplomatic efforts with North Korea had consistently failed, adding that “only one thing will work”.
Mr Trump has engaged in an escalating war of words with North Korean strongman Kim Jong-un (pictured), trading insults amid rising tensions between the two nucleararmed rivals.
“Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid,” Mr Trump tweeted.
It “hasn’t worked, agreements violated before the ink was dry, makings fools of US negotiators. Sorry, but only one thing will work!”
The US has not ruled out the use of force to compel Pyongyang to halt missile and nuclear tests and Mr Trump has threatened to destroy the country.
As Secretary of State Rex Tillerson flew home from meeting top Chinese officials, Mr Trump tweeted that his envoy was “wasting his time” in trying to probe North Korea’s willingness to talk.
The message came after Mr Tillerson had revealed there were backchannels between US and North Korean officials.

Pro-unity Catalans take to the streets to condemn ‘selfish revolution’

They call themselves the silenced; the Catalans who are opposed to independence but have been unable – and often afraid – to make their voice heard above the roaring passion of the secessionists.
Huge numbers are expected to protest on Sunday in Barcelona against the perceived hijacking of the political process by an independence movement that has so far never won the support of more than 48% of the population.
The march has been organised by Societat Civil Catalana (SCC), the main channel for anti-independence sentiment in what has suddenly become one of the most troubled regions in Europe. The march will call for a new phase of dialogue with the rest of Spain and will be attended by such luminaries as the Nobel-winning Peruvian novelist Mario Vargas Llosa and Josep Borrell, former president of the European parliament.
There is acute uncertainty over where the crisis will lead, after Spain’s constitutional court banned the Catalan parliament from sitting tomorrow to prevent it declaring independence. While some members of parliament said the sitting would go ahead as planned, eyes are now focused on a statement that Carles Puigdemont, the Catalan president, intends to make on Tuesday.
Puigdemont is under pressure to pull back from the brink by not declaring independence. The Barcelona Bar Association (ICAB) has published an open letter saying: “The Independent Commission for Mediation, Dialogue and Conciliation has told the president that it is essential to hold back on political decisions that will increase the tension between the state and Catalan governments.”
Saturday saw marches and demonstrations all over Spain, with tens of thousands gathering in Madrid’s Plaza Colón in favour of a united Spain. In dozens of towns and cities, including Barcelona, people joined the “white demonstrations” demanding dialo-
gue. Dressed in white and without any flags, protesters marched under the single slogan in Spanish and Catalan: Hablemos/Parlem – let’s talk.
Ada Colau, the Barcelona mayor, who was among thousands on the city’s white demonstration, said: “We mustn’t resign ourselves to polarisation, bellicose language and the competitive logic that only seeks the defeat of the adversary.”
Today’s show of strength by anti-independence Catalans will be watched closely by those on both sides of last week’s referendum divide.
Álex Ramos, president of the SCC, told the Observer: “The nationalism here is ethnic, not civic; it’s linguistic, cultural, tribal, sentimental and romantic. It’s not like the French revolution, demanding equality and liberty for all. Deep down these nationalists think they’re different from others and, ultimately, better than them.
“This is a revolution of the powerful, of Catalonia’s wealthiest classes, not the oppressed. It’s a selfish revolution. They mobilise, telling the world how hard done by they are, and then dismiss anyone who disagrees as a fascist.”
Many complain of an atmosphere of intolerance and intimidation that leads those who oppose independence to bite their tongues. Reporters without Borders recently published a report detailing the official pressure and online trolling of journalists who stray from the secessionist line.
“No one talks about the state of siege brought on by the secessionists that has the rest of us watching what we say and what we do, or that we don’t post on Facebook just so that others don’t come down on us and call us fascist,” one Barcelona native who didn’t wish to be named told the Observer.
“I’m against independence, and up until now people have accepted my opinion with respect,” says Lola García, 49, from Cambrils. “But now, depending on who I’m speaking to, I’m a bit more careful.”
“The issue is deeply divisive in Catalonia,” says Nick Lloyd, who runs Spanish Civil War tours and has lived in Barcelona for 28 years. “I have Catalan friends and family on both sides. Those against are often worried about expressing their opinions for fear of being called a fascist. Many of them are, in fact, far more leftwing than many on the proindependence side. As a foreigner, they can ignore me, but my Catalan partner feels far more uncomfortable about talking, depending on the company.”
It is estimated that some 40% of Catalans are either Spanish or the children of Spaniards who emigrated here in vast numbers in the latter half of the 20th century. A further 17% – 1.2 million people – have made Catalonia their home in the past 15 years, roughly a third each from Europe, Latin America and Africa, in addition to around 150,000 from Asia. Few of these share the same sentimental attachment; many don’t feel included in the independence debate.
“I feel totally excluded from the discussion, both at state and local level,” says María Araya, who lives in Premià de Mar and moved to Spain from Argentina 15 years ago. “As foreigners don’t get to vote, no one cares what we think.” On a personal level, Araya says she feels Catalan society is inclusive but is concerned about the way things are now. “If they don’t negotiate soon, things could get very tense.”
Ruth Nieto, a waitress who emigrated to Barcelona from Ecuador when she was 19, is neither strongly for or against independence, but says what matters are human and civil rights. “I feel included,” she says. “Catalonia has shown that it is a multicultural, multilingual and democratic society.”
“Not having a vote makes it difficult to be part of the discussion, but standing by and seeing both sides make huge mistakes is becoming less of an option,” says Rose Kowalski, a film producer who lives in the secessionist heartland of Girona and whose partner is Catalonian.
“What I can’t bear is the slogans saying ‘We vote to be free’. I find it absolutely insulting to claim that we’re not free at the moment,” she says. “Look at Turkey, look at Myanmar, look at Catalonia’s own history under Franco – that’s a denial of freedom.
“In Girona, it’s almost impossible to discuss the manner in which the Catalan government is pushing secession through,” she says. “Any examination of the arguments or motives is regarded as taking a position against.”
There are signs that Puigdemont, who has led the charge to independence, is now being reined in by the old guard of the nationalist movement. Plans for a unilateral declaration of independence tomorrow were stymied when the constitutional court prohibited the Catalan parliament from sitting, though this doesn’t mean UDI is off the agenda.
The flight of Catalonia’s two biggest banks, with other businesses also fearful that independence could push the region out of the European Union, is having a sobering effect. A popular Catalan saying asserts that “la pela es la pela” [money is money].
A referendum on independence remains the sticking point. Ramos cites the parallels with Brexit – substitute “independence” for “take back control” – and rejects the orthodoxy that what is needed is a legally binding referendum.
“A referendum is the problem, not the solution,” he says. “I think it’s better to come to a negotiated agreement and then have a referendum to ratify it than to pit one side against the other. A referendum is socially divisive.”

India to push ‘permanent solution’ for food security at WTO Marrakesh meet

As key World Trade Organization (WTO) member countries converge in Marrakesh, Morocco, this week for a stock-taking meeting, India will focus on ensuring that a permanent solution on public stock-holding subsidies for food security is a central part of the agenda at the December ministerial meet in Buenos Aires.
“Individually and also as part of the G-33 coalition of developing countries, India will insist that a permanent solution on public stock holding be one of the deliverables in Buenos Aires as was promised at the Ministerial meets in Nairobi and Bali,” a government official told BusinessLine.
Trade ministers from a number of WTO member-countries, including Commerce and Industry Minister Suresh Prabhu, will brainstorm in Marrakesh this week to identify priority areas for the Buenos Aires ministerial.
For India and other G-33 countries with a large population dependent on agriculture, it is important that subsidies extended for public stock-holding programmes — in the form of minimum support prices to farmers — do not face penalties at the WTO.
At present, such subsidies are classified as trade distorting and capped at 10 per cent of production value.
Tough conditions
While India managed to negotiate a peace clause after the Bali meeting, which lays down that no action will be taken against it in case such subsidies breach limits, it is subject to a number of tough conditions which could render the clause ineffective.
“The peace clause was an important achievement for India. But it has too many conditions attached to it, including ones stating that such subsidies should not affect the food security of other countries and world prices, which could create a problem in invoking the clause. So, India necessarily has to have a permanent solution as promised,” according to a Delhi-based trade expert.
The G-33 group has proposed a permanent solution, but it has not been accepted by many members yet, including Australia, Russia, Japan and Thailand.
The G-33 proposed inserting a new annex (Annex 6) to the WTO Agriculture Agreement, to allow public stock-holding programmes to be exempted from a cap on trade-distorting domestic support, as long as they met the requirement to share information.
On the other hand, the EU and Brazil submitted an alternative proposal linking public stock holding to domestic subsidies. “India and the G-33 have opposed the proposed linking of public stock holding to domestic subsidies as they feel that the former is to be sorted out independently. New Delhi will keep maintaining this position,” the official said.
In the area of proposed disciplining of fisheries subsidies to check over-fishing, another identified deliverable for the Buenos Aires meet, New Delhi has sought special and differential treatment for developing countries and exemption for fishing within territorial waters.

Gold options will help expand the market further: MCX’s Paranjape

MCX, one of the top 10 commodity exchanges in the world, is set to launch gold options in the next two weeks.
Addressing the Bullion Conclave organised by MCX, in association with BusinessLine, in Thrissur, the hub of Kerala’s gold business, Mrugank M Paranjape, MD and CEO, MCX, said: “We will be announcing the launch next week. We believe the introduction of gold options will open up the market and India will get a true price-hedging mechanism.”
The option contract will be anchored on a 1 kg future contract and the premium will be approximately ₹30,000 at current prices, which is the domestic price benchmark, said Paranjape.
Policy-makers now recognise gold as an asset class, both for consumption and investment, and are working on policies to strengthen the spot and derivatives market, the MCX CEO added.
“For any market to be successful, it needs widespread acceptance across the value chain. The biggest component of the value chain for gold is jewellers. Kerala will be the most important centre as the State has a large number of jewellers — both big and small — and of course, the highest per capita consumption in India,” said Paranjape.
Contract options allow participants to not only hedge prices, but also to avail of the benefits of upward price movements, he added.
MCX, with an average business turnover of ₹22,500 crore, expects the launch of gold options to increase its business by 20-30 per cent, he said.
‘Promising policies’
Kuriakose Conil, Vice-President (Retail Business), Federal Bank, said certain policy announcements by the government, such as the ban on import of gold coins, allowing 100 per cent FDI in the sector, gold monetisation schemes, etc look promthe Mrugank M Paranjape, MD and CEO, MCX, lights the lamp at the Bullion Conclave, as Raghavan Srinivasan, Editor, BusinessLine, applauds. The conclave was organised by MCX, in association with BusinessLine, in Thrissur
ising for the industry, both in long and short term.
The retail jewellery segment is expected to see double-digit revenue growth in FY18 on the back of regulatory headwinds fading out, continued favourable demographics and improved consumer sentiment.
Earlier, in his welcome address, Raghavan Srinivasan, Editor,
BusinessLine, pointed out that India is the world’s largest, most sophisticated and evolving market for gold. Hence, it is important to have formal trading in gold so as to explore its full potential. This would help expand business while dampening volatility in the gold market, he added.

Cover for the long run

The insurance sector has been buzzing with investor activity over the past year, as insurers — both life and non-life — have been making their debut in the primary market. General Insurance Corporation of India (GIC) is the latest to join the IPO bandwagon. GIC is the largest reinsurance company in India in terms of gross premiums in FY-17, accounting for about 60 per cent of the premiums ceded by Indian insurers to reinsurers during the year.
Reinsurance essentially is the arrangement whereby insurers transfer part of the risks to one or more insurers or reinsurers. Currently in India, non-life insurance business constitutes the chunk (95 per cent in FY-17) of the total premium ceded.
GIC provides reinsurance across segments such as fire (property), marine, motor, agriculture, aviation, and health, among others. Thanks to the Centre’s Pradhan Mantri Fasal Bima Yojana scheme, the company saw a sharp jump in the share of its agriculture business, which constituted 29 per cent of its gross premiums in FY-17 (from about 7 per cent in FY-16).
While the near seven-fold increase in gross premium of crop insurance drove the 82 per cent jump in the company’s overall gross premium in FY-17, it also led to a 34 per cent increase in operating profit, thanks to the lower claims ratio in agriculture (ratio of claims incurred to net earned premium) due to normal monsoon in FY-17. This, along with higher investment income, offset some of the higher claims incurred across other businesses. On the net level, GIC’s profit grew 11 per cent in FY-17 after slipping by 2 per cent in the previous year.
Given that non-life business contributes the chunk of the reinsurance business in India, healthy growth in the underlying non-life insurance space, given the low insurance penetration level in India, augurs well for the growth in reinsurance premiums too. However, profitability could remain volatile, given the rising risk from catastrophic losses, competition from foreign reinsurers, higher amount of crop insurance being reinsured in recent times and adverse regulatory changes. While GIC’s gross premium grew 32 per cent annually between FY-14 and FY-17, its profit has increased at a lower 9 per cent annually during this period. Given all of this, at the upper price band, GIC’s issue, priced at around 24 times its FY-17 earnings, is not cheap. Global reinsurers trade at around 9-13 times their earnings. Given the weak listing of insurance companies such as SBI Life and ICICI Lombard on the back of pricey valuations, investors should also temper their expectations around listing gains.
That said, it is important to understand that the higher growth in reinsurance premiums, superior yield on investment and return ratios in India vis-à-vis global players, make a like-to like comparison difficult. Also, on a price-to-book basis (FY-17), the issue is priced at about four times, which is reasonable.
While spectacular gains in the short term are unlikely and risks in the business could lead to volatility in earnings in certain years, GIC’s offer holds promise for investors with a long-term perspective. Growing opportunity in the reinsurance space, possible unlocking of value from GIC’s large legacy investment book, healthy return on equity of 17-20 per cent, and longstanding relationship with domestic insurers, still remain a big draw.
The offer comprises a primary issue of 1.72 crore shares and an offer-for-sale of 10.75 crore shares by the Union Government. There is a ₹45 discount on the offer price for retail investors.
Diversified segments
GIC offers reinsurance across key segments in India as well as outside India. Some of the segments such as fire, marine and aviation derive most of their business from outside India. For instance, fire constituted 24 per cent of total gross premiums in FY-17, of which 16 per cent was from outside India. On the other hand, besides agriculture, motor (20 per cent of total gross premiums in FY-17) and health (12 per cent), derive most of their business from India. Overall, 30.5 per cent of gross premiums came from outside India for GIC in FY-17.
Besides agriculture, fire, motor and health too witnessed a healthy growth in gross premiums in FY-17.
GIC’s top clients, including both public and private insurers, such as Agriculture Insurance Company, National Insurance, ICICI Lombard General Insurance, United India, New India Assurance and HDFC ERGO, among others, account for 56 per cent of GIC’s gross premium in FY-17.
Just as insurers pass on a portion of their risk through reinsurance, a reinsurer, in turn, passes on its risk by reinsuring its own book by purchasing what is known as a retrocessional coverage from other reinsurers. GIC purchases retrocessional coverage to mitigate large risks from businesses such as marine, fire, agriculture and health, among others, thus capping each risk loss to ₹100 crore in case of domestic and $15 million outside India.
Operating metrics
The economics of an insurance business principally rides on the concept of ‘float’, wherein insurance companies collect premiums upfront and pay claims afterwards. This creates a float or investable asset base that can be deployed to generate returns. Additionally, if premiums exceed the total expenses and the eventual losses, then the underwriting profit adds to the investment income.
Hence, two ratios — claims and combined ratio — are used to measure the profitability of an insurance business. Claims ratio (ratio of claims incurred to net earned premium) is essentially total incurred losses in relation to the total premiums. Combined ratio measures the incurred losses and expenses in relation to the total premiums.
GIC’s combined ratio fell to 100.1 per cent in FY-17, from 107 per cent in FY-16 and 108.8 per cent FY-15, mainly on account of a fall in claims ratio to 81.6 per cent in FY-17 from 84-87 per cent in previous years. This decline has been due to the sharp fall in claims ratio in the agriculture business, thanks to strong growth in premiums and normal monsoon during FY-17. But given the vagaries in the agriculture business, claims ratio could shoot up in a year. In FY-16, for instance, claims ratio had jumped to 154 per cent from 95 per cent in FY-15, on account of lower rainfall in certain regions, increasing claims. As the exposure of the insurance industry to the agriculture segment increases, volatility in earnings could also go up.
That said, profitability is also dependent on float management. On this count, GIC’s large investment book (₹41,929 crore — book value and ₹73,902 crore — market value as of June 2017) is a key positive. The yield (without unrealised gains) has been in the 12-14 per cent range.
Rising competition
A risk that GIC could face is the increase in competition from foreign players.
Foreign reinsurers have been accepting reinsurance from Indian insurance companies without a physical presence in India. IRDAI regulations now permit private Indian reinsurers to be licensed, foreign reinsurers to open branches in India.

Honeypreet even doled out the monthly allowance for Gurmeet’s real kids

by engaging the Haryana police in a breathless chase across three states, there hasn’t been a peep out of his ‘real’ family members. Barring, of course, the brief trip his ageing mother Naseeb made to visit Gurmeet Singh in Rohtak’s Sunaria jail on September 25.
A lot of what Honeypreet claimed in her nine-minute chat-on-the-run with india today TV appears problematic. Contrary to her teary assertion that she never nursed any Bollywood dreams and wanted to remain behind the scenes, Honeypreet fully shared Gurmeet Singh’s penchant for the bling lifestyle of ostentatious, over-the-top clothing, flashy cars and glitzy movies. Starting out in 2015, she has been in all his five movies, even co-directing the last two—Hind ke Napak ko Jawab and Jattu Engineer. Just a few months before his incarceration, Gurmeet Singh had famously bragged that ‘Honeypreet has broken Jackie Chan’s record by playing 21 different roles’ in his now-unlikely-to-be-released sixth movie, Online Gurukul.
Also quite the social media animal, on www.honeypreetinsan.me, her personal web portal, Honeypreet describes herself as a “philanthropist, cine editor, actor and director”. She has, believe it or not, over one million followers on Twitter and another 528,000 on Facebook. This hardly sounds like the reticent bystander she now, understandably, wants to be seen as.
The only ‘family member’ by his side when Gurmeet Singh was convicted of raping two sadhvis on August 25, Honeypreet was subsequently also permitted to accompany him onboard the chartered helicopter that ferried him to Rohtak’s Sunaria jail. She even requested permission to stay with the prisoner in his jail cell as his “physiotherapist”, but was, expectedly, turned down.
It has been one hell of a chase since then. There’s evidence to show that Honeypreet headed back to reach the Dera Sacha Sauda in Sirsa around 3.45 am on August 26. Separating from the rest, she left Sirsa heading out to Hanumangarh, where she stayed with relatives for a night before travelling to Gurusar Modiya on August 28.
While the SIT, headed by Haryana police ADGP P.K. Agarwal, tracked her diligently and came close to nabbing Honeypreet on more than one occasion, she somehow always managed to evade the posse. And for someone who’s now posing as a ‘damsel in depression’, Honeypreet seems to be well versed in the ways of a seasoned absconder.
Consider what the SIT now knows: Accompanied by just one or two persons at any given point and time, Honeypreet ditched the greater luxury of the top-of-the-line Lexus SUVs she was accustomed to in Gurmeet Singh’s company, for the relative anonymity of smaller Hyundai and Maruti hatchbacks; smartphones were replaced by cheap Rs 800-1,000 feature phones with the pre-activated, pre-paid SIM cards freely available in Rajasthan (where Sacha Sauda has a significant following).
But like all fugitives, Honeypreet (or someone accompanying her), made the critical error that every good-cop-in-a-chase looks out for. Mobile phones, she was known to be carrying, were briefly switched on in Punjab on October 1. After that, it was only a matter of time.
Honeypreet Insan will now face a trial and possible conviction. On September 18, DGP B.S. Sandhu said a total of 41 people were killed (35 in Panchkula and 6 in Sirsa) in the August 25 violence, besides destruction of property worth crores.

Strong prospects make GIC Re IPO attractive

Growth prospects for the country’s largest reinsurer, General Insurance Corporation of India (GIC Re), which has 60 per cent of the ~39,000-crore reinsurance market (nonlife plus life), appear robust. The company takes on risks from general insurance companies for a premium. It is expected to benefit from the strong growth in India’s non-life insurance segment, which accounts for 95 per cent of the reinsurance market.
Non-life premiums of the sector have grown at 17 per cent annually over the FY12-17 to ~1.28 lakh crore. The is projected to more than double to ~3 lakh crore by FY22, growing annually at 15-20 per cent, according to estimates by CRISIL and the Insurance Regulatory and Development Authority of India. This should also reflect positively on the Indian reinsurance market, just under ~40,000 crore and expected to grow at an annual 11-14 per cent to ~70,000 crore by FY22.
This, with robust yields on investment and a diversified book, both in terms of segments GIC Re caters to as well as the geographies, helps mitigate risk. While the company underwrites risk in eight segments, the India business contributes 55-69 per cent of premium, the rest coming from operations outside the country. Its overseas operations are also big, given that GIC Re was the 12 largest reinsurer globally in 2016, according to CRISIL Research. Its international operations are spread over 160 countries and earned gross premium of ~10,300 crore in FY17.
Overall, net premiums have doubled over FY14-FY16. The key drivers are the crop insurance market (Pradhan Mantri Fasal Bima Yojana), motor (automobile sales, third-party premiums), health (led by higher medical costs) and fire. Agri, motor and fire account for three quarters of gross premiums. Premium growth in FY15-17 period of 48 per cent was largely led by the agri reinsurance business, on a low base. Analysts, however, say even if the agri segment is excluded, growth is expected to be about 20 per cent over the next few years, driven by low penetration levels and expansion in international business.
The other important source of revenue for the reinsurance company is the return from investment income. This is important, given that reinsurance players fail to generate underwriting profits on a consistent basis. Operating profit % change y-o-y Net profit % change y-o-y 3,269 5.5 2,689 -4.0 The company, which has over 55 per cent of its investments in equities, has generated yields of over 12 per cent over the past few years. This coupled with the fact that operating expense ratio are coming down consistently over the last few years from 133 per cent to in FY14 to 83 per cent in FY17 should help. The ratio is defined as operating expenses as a percentage of net premiums and is an indicator of operational efficiencies.
The company, however, needs to improve its return on equity, which has come down from 20.7 per cent in FY15 to 17 per cent in FY17, given competitive pricing, which is impacting profitability. Analysts, however, say pricing pressures in the reinsurance market globally should ease over the medium term, which coupled with the company’s objective of improving combined ratios (ratio of costs and revenues) should reflect in higher profitability and return ratios. Though the ratio stood at 98.4 per cent in June 2017 quarter, it has been 3,799 16.2 3,004 11.7 over 100 per cent (100-108 per cent) over the past few years, translating into losses at the operating level. The quantum of claims the company gets in a year, however, has a strong bearing on this ratio. For instance, in a year which has witnessed catastrophic events, the claims could be higher.
However, GIC’s risk management capabilities should help minimise the impact. The company expects to bring the ratio down to the 95-100 band over the next two years and between 90 per cent and 95 per cent over the next five years. This should help it generate net profits from core operations, rather than be dependent on investment income.
Lastly, all this comes at a decent price. The initial public offering (IPO) valuations at 1.2-1.3 times its FY17 price-to-book (including unrealised gains in investment book) are, according to analysts, reasonable and in line with global peers. The solvency ratio, which indicates how well a company is prepared to service claims, is also reasonably high at 2.4 times in FY17. Given the potential for growth, the underwriting skills in various segments, the diversified base and an improvement in key parameters, investors could look at the issue with a medium term investment horizon.

Just 10% of pending cases filed by women

Though women comprise nearly half the country’s population and are often at the receiving end of family and property disputes, besides crimes, few of them move courts to seek redress.
This is borne out by the fact that just a little over 10% of the 2.55 crore cases pending in subordinate and district courts across the country have been filed by women.
A key aspect of pending litigation is that of the 90% ca- ses filed by men, 70% are criminal cases, whereas among those filed by women, criminal cases add up to less than 50% despite widespread incidence of domestic violence and harassment against them.
The fact that nearly 90% of all cases are filed by men indi- cates the patriarchal structure of society where men continue to take decisions in matters of family and personal disputes. Six states have a higher percentage of women litigants than the national average (10.3%).
Andhra Pradesh tops the chart of such states with a figure of 16%, followed by Bihar and Punjab (15% each). Goa, Tamil Nadu and Chandigarh each have 14% cases filed by women. Among larger states such as UP, MP, Maharashtra and Rajasthan, women litigants in lower courts account for 9.510.5% of total cases, almost close to the national average.
In states such as Haryana, Himachal, Jharkhand, Karnataka and West Bengal, cases filed by women in lower courts comprise around 12% of total cases.
Even states with higher All India 2,55,76,963 26,26,765 per capita income, like Delhi and Gujarat, do not witness much litigation initiated by women. In fact, cases filed by women in these states are among the lowest in India. At 3.8%, Gujarat has the lowest with just 65,000 of the 17.26 lakh cases in the state being those filed by women. In Del- hi, the percentage of such cases is 5% with about 30,000 of the 5.74 lakh cases pending filed by women.
Even in UP, which has one of the country’s highest pendency, there is a higher percentage of (10.55%) cases filed by women. The total cases filed by women in UP is 6.31 lakh while the total pendency in its subordinates courts is 59.86 lakh.
Other states where few cases have been filed by women include Uttarakhand (4.8%), Kerala (7%), Odisha (7.6%) and J&K (7.75%). In northeastern states, the trend is similar to the national average where cases filed by women constitute 10%-13%.