Sat, 13th February 2016

Anirudh Sethi Report


Archives of “board of directors” Tag

IMF says Christine Lagarde nominated for second term

The International Monetary Fund is making what everyone assumed official. Christine Lagarde is heading toward a second five-year term as managing director unopposed.

The official nominating period closed at midnight last night and the fund has just put this statement out:

IMF Statement on the Managing Director’s Selection Process

The Dean of the Executive Board of the International Monetary Fund (IMF), Mr. Aleksei Mozhin, made the following statement today:

“The period for submitting nominations for the position of the next Managing Director closed on Wednesday, February 10. One candidate, current Managing Director Christine Lagarde, has been nominated.

“The Board will now work in line with the process described in its decision of January 20, including meetings between the candidate, Mme Lagarde, and Executive Directors. The Board’s goal is to complete the selection process as soon as possible.”

Ms Lagarde’s current term expires in July.

Write-offs a scam- Says Former Reserve Bank Deputy Governor Dr K C Chakrabarty

Former Reserve Bank Deputy Governor Dr K C Chakrabarty says technical write-offs by banks is a “scam” and should be stopped.

“Technical write-offs by Indian banks are inequitable and should be stopped. It is a big scam. Small loans are rarely written off, most of them are big loans,” London-based Chakrabarty, who handled the supervision department of the RBIfrom 2009 to 2014, told The Indian Express.

Public sector banks have written off Rs 1,14,000 crore in the last three years, as reported in The Indian Express on February 8, based on a response by the Reserve Bank of India to an RTI application.

Banks are planning to write off more bad loans in the current year, and this could be Rs 52,227 crore, similar to the quantum written off in 2014-15.

There’s a reason for the eagerness on the part of banks to write off loans though a loan is technically the bank’s asset. “It benefits banks in terms of tax liability,” M Narendra, former chairman and MD of Indian Overseas Bank, said. The other benefit is that the bad loan no longer stays in the bank’s books.

The write-off instruction comes from the head office.

How Kuroda fooled BOJ members on negative rates

We all know that Kuroda fooled the markets on negative rates, denying their consideration right up to a January 21 interview.

Which, in effect, has cost him credibility, but also bullets in his fight for a weaker yen.

Such a shame.

This piece from Reuters takes an inside look at Kuroda even fooled the BOJ Board (bolding is mine):

  • Most of the nine board members were only told of the scheme in the week leading up to Friday’s rate review, according to interviews with more than a dozen officials familiar with the deliberations.
  • “If you’re a board member, you’re told about the plan at the last minute,” said a former board member, speaking on condition of anonymity. “It’s hard to argue against it or draft a counter proposal when there’s so little time left.”


United Spirits seeks shareholders’ nod to report sick to BIFR -NETWORTH MORE THAN HALVES IN 4 YRS


Below 3038 ,Stock Ready to slide upto 2690-2574 ?

Crisis-ridden United Spirits on Tuesday said its networth has eroded by more than 50 per cent of its peak networth due to a host of reasons, including provisions on advances to its erstwhile promoter group firm United Breweries (Holdings) Ltd.

United Spirits (USL) has called an Extraordinary General Meeting of its shareholders on January 22, 2016.

In a notice for EGM, USL said, “The company shall report to the Board for Industrial and Financial Reconstruction (BIFR) of the fact that the accumulated losses of the company as on March 31, 2015, have resulted in erosion of more than fifty per cent of its peak networth during the immediately preceding four financial years.”

It further said: “This extraordinary general meeting is being convened to consider and approve the enclosed report of the Board of Directors on such erosion and its causes, and the measures being taken as per the relevant provisions of SICA (Sick Industrial Companies (Special Provisions) Act, 1985), and also to approve the reporting of such erosion to BIFR in terms of Section 23 of SICA.”

The company said its accumulated losses as on March 31, 2015 at Rs5,045.45 crore is greater than 50 per cent of the peak net worth in the immediately preceding four financial years at Rs5,849.62 crore.

United spirits said two main reasons for accumulated losses are “diminution in the value of long-term investments in subsidiaries and loans and advances to subsidiaries due to low capacity utilisation, negative margins, or strategic shift in business (Rs716.16 crore)” and “provision on advances to United Breweries (Holdings) Ltd (Rs995.45 crore)”.

IMF Chief Christine Lagarde to stand trial over Tapie corruption affair

A French court has ordered Christine Lagarde, the head of the International Monetary Fund, to face trial over her role in a disputed €400m payout made to businessman Bernard Tapie in 2008.

Ms Lagarde, who was French finance minister at the time, has for years denied wrongdoing in the affair that has entangled several members of the cabinet of former President Nicolas Sarkozy.

She appeared to have won the day in September when prosecutors argued that the case against her should be dropped.

But France’s Cour de justice de la République, a special tribunal set up to try ministers, said on Thursday that she would stand trial over the affair. Ms Lagarde is accused of negligence in public office in relation to misuse of public funds, an offence that carries a maximum sentence of one year in prison and a fine of up to €15,000.

The decision to put the IMF chief on trial is the latest twist in the 22-year legal saga.

It concerns more than €400m paid out to Mr Tapie by the French government in 2008 in compensation after he claimed he was defrauded by Crédit Lyonnais, at that point a state-owned bank, into selling his stake in sports equipment company Adidas for lower than it was worth in 1993.

ECB’s Coeure: ECB is not committed to act in December

I had the headlines from European Central Bank Executive Board member Benoit Coeure much earlier today:

  • ECB’s Coeure: ECB does not have to act in December
  • and the full text of the interview is available from here … Its the full Interview with Benoît Cœuré, Member of the Executive Board of the ECB

Bloomberg have a bit of a recap up now, too: The European Central Bank has yet to decide on further easing and isn’t committed to doing so next month, Executive Board member Benoit Coeure said.

His comments may have given the euro some help higher today, or maybe it was this, too: One reason the euro is gaining ground

China edges closer to inclusion in the IMF’s SDR in November, more

Over the weekend I posted on China edges closer to IMF’s SDR inclusion, what does it mean for the yuan?

More now according to “three people briefed on the IMF discussions, who asked not to be named because of the sensitivity of the issue”:

  • IMF staff are set to give the all-clear for China’s yuan to be included in the SDR basket
  • Approval lays the groundwork for a favourable decision by policy makers
  • The IMF’s executive board is scheduled to decide in mid- to late-November
  • “Everything is on course technically and there is no obvious political obstacle. The report leans clearly towards including the RMB in the (basket) but leaves the decision for the board” one of the officials said
  • “There is no real discussion, no obstacles, all seems on course,” a second official said

Reuters have more

This will not only have implications for the yuan (see the link in the first line, above), but also for China’s bond market (more attractive).

Steve Ballmer builds 4pc Twitter stake.Stock zooms by 5% ,Market Cap up by $1 Billion

The former chief executive of Microsoft and prominent Silicon Valley personality Steve Ballmer has bet on Twitter, building a 4pc stake in the social media company.

A tweet posted on Friday claimed that Mr Ballmer had purchased 4pc of Twitter shares in recent months, praising Twitter for its “good job” appointing Mr Dorsey as CEO and creating a “leaner, more focused” company.


The man who ran Microsoft from 2004 to 2014 later confirmed in an email to Bloomberg that he had indeed created a sizable position in Twitter, and that his messages on the social network had not been the result of foul play.

Is Aurobindo A Value Trap?

Aurobindo has corporate governance issues such as inferior financial reporting, less than ideal disclosures and taxation issues relating to promoters. Moreover, the company also faces structural issues around absence of ‘moated’ revenue/profit streams and long-term growth drivers. Also, it faces potential revenue/margin erosion as incumbents return and regain market share post FY18 through competitive pricing in complex injectables, controlled substances and cephalosporin. 
Accounting quality  
Low cash flow generation and high loans and advances as a percentage of net worth Corporate governance  Opaque tie-ups with relatively unknown companies  Capital allocation   Vertical integration and improvement in product mix is a positive; gross block turnover in line with peers.
Lack of investment in innovation and no moats around its business; revenues exposed to return of competition Source: Company, Ambit Capital research. Note: = rating of 4/4; = rating of 3/ 4 and so on. Accounting quality – Poor cash flow generation Aurobindo has poor cash flow generation (CFO/EBITDA of 56% vs peer average of 85%) led by an extended working capital cycle (93 days vs peer average of 65 days).
Its accounting practices have raised issues before, leading to undisclosed income of `300mn during raids by income tax authorities in 2012 (click here).  Capital allocation – Improvement in product mix and vertical integration Aurobindo moved up the value chain from an API manufacturer to a formulation manufacturer. Its acquisition track record is yet to be established; though the Actavis acquisition looks promising, we would wait before giving too much credit as pharma companies have struggled with profitability in Western Europe. Corporate governance – Distribution agreement impairs upsides Mr. Nithyanand Reddy (Chairman, ex-MD) appears to be a connected person.

Breaking-China imposes 6-month ban on stock sales

China on Wednesday said it was banning major shareholders, executives and directors of listed companies from selling any of their stakes for six months – the latest in long line of measures the country has introduced in recent days to stop a brutal market sell-off that has wiped more than $3 trillion off its main exchanges.

In a statement, the China Securities Regulatory Commission said investors who own stakes exceeding 5 per cent must maintain their positions.

The ban is aimed at safeguarding the market from what the regulator had earlier described as panic and irrational selling.

It comes after another bout of sharp selling in Chinese shares on Wednesday, with the Shanghai Composite closing down 5.9 per cent, the Shenzhen index losing 2.5 per cent and Hong Kong’s Hang Seng index tumbling 5.8 per cent to erase all its gains over the previous 12 months.

In a further effort to halt the rout, Beijing has already suspended initial public offerings, used state funds to buy shares directly, cut trading fees in a bid to improve market liquidity and instructed government-owned companies not to sell shares.

Here is a rough translation of the statement (via Google Translate):