Tata Motors Posts Flat Profit, Flags Interest Rates

Tata Motors on Thursday posted roughly flat profit in the fiscal first quarter that lagged estimates as higher costs squeezed margins, and said rising interest rates in Asia's third largest economy was a matter of concern.

Tata Motors , part of India's salt-to-software Tata conglomerate, whose range includes utility vehicles and the ultra-cheap Nano, said revenue rose, driven by British luxury brands Jaguar and Land Rover , which it bought from Ford Motor Co for $2.3 billion in 2008.
But the rising costs of steel, rubber and other raw materials have squeezed margins and forced some Indian carmakers, including Tata and Maruti Suzuki, to raise prices.
"Going forward, (we expect) slowing growth in commercial vehicles prompted by rising costs, interest rates and inflationary concerns, and expectations of slowing industrial growth," Chief Financial Officer C. Ramakrishnan said at a press conference.
India has raised interest rates 11 times since March 2010 to combat stubborn inflation, hurting industries based on credit. The Indian auto industry is spurred by an aspirational middle class that relies on loans to buy cars. It targets families of four that ride on motorcycles, a common sight on Indian roads.
But even the world's cheapest car failed to lure buyers in July. Tata's sales fell in July, led by a slump in sales of the Nano, which slid 64 percent.
Overall car sales in India fell 15.8 percent in July, the first drop in two and a half years, and higher interest rates and car prices are expected to hurt demand further.
Still, Tata has planned annual capital expenditure of 30 billion rupees to 35 billion rupees for its India business, Ramakrishnan said, adding that sales from its JLR unit should continue to improve as it expands into growth markets such as India, China, Brazil and Russia .
"At the most there could be one more rate hike...when the rate hike cycle is over, Tata Motors will be the first stock to jump," Kishor Ostwal, Chairman at Mumbai based CNI Research said, adding that the concern is already baked into the stock.
LAGS FORECAST
Tata posted first-quarter net profit of 19.99 billion rupees ($441.7 million), compared with 19.89 billion a year earlier. Its net debt at the end of June stood at 150 billion rupees.
Tata Motors ' consolidated revenue rose 24 percent from a year earlier to 335.72 billion rupees. A Reuters poll had forecast net profit of 21.6 billion rupees for the quarter on net sales of 329.1 billion.
Tata spent 203.9 billion rupees on consumption of raw materials in the quarter compared with 148.5 billion rupees a year earlier.
Revenue at Jaguar Land Rover rose 20 percent to 2.7 billion pounds. Sales at the unit will not be hurt by economic uncertainty in the short term, its Chief Executive Ralf Speth said at the media briefing.
In June, India's top carmaker Maruti Suzuki beat estimates with an 18-percent rise in its fiscal first quarter net profit, but posted a 25-percent drop in July sales.

JPMorgan Profit Rises, Loan Book Grows

BOND TRADING Bond trading revenue fell 18 percent from the first quarter, but the decline was less than some investors feared. Shares of investment banks Goldman Sachs Group Inc and Morgan Stanley rose on hopes that JPMorgan's trading results bode well, but turned negative later in the day. JPMorgan earned $5.43 billion, or $1.27 a share, in the second quarter, beating the average Wall Street estimate by 6 cents a share, according to Thomson Reuters I/B/E/S. The results were up from earnings of $4.8 billion, or $1.09 a share, a year earlier. The bank benefited from not having to pay a British tax on bonuses. That tax reduced profits by $550 million, or 14 cents a share, last year. JPMorgan made more loans during the quarter, net of customer loan repayments. Its loan book grew to $689.74 billion at the end of the quarter from $686 billion at the end of March as increased business lending offset a 2 percent decline in consumer lending. The bank also gathered more deposits during the quarter; deposits rose 5 percent from the first quarter to $1.05 trillion. Chief Financial Officer Douglas Braunstein said mid-sized companies delivered much of the money. Shrinking loan books and low interest rates since 2008 have made it difficult for banks to post profits, or increase them. A large part of earnings over the past year has come from setting aside less money to cover bad loans, or dipping into funds previously set aside. Many analysts hope that banks will start to post loan growth in the coming quarters, which would be a sign of sustainable increases in profits. Dimon, who is famously blunt, seemed optimistic about the outlook for profits. He said the bank will build capital levels in the coming months, and criticized regulators for not allowing it to return those funds to shareholders faster. "God knows why we have to hold all that capital," Dimon said, adding that banks' capital ratios are going "to drive up so fast people are going to be surprised." JPMorgan reduced the expense it recorded for credit costs to $1.81 billion in the second quarter from $3.36 billion a year earlier. However, that was up from $1.17 billion in the 2011 first quarter. After announcing earnings, the bank went to the corporate debt market and sold $1.75 billion of bonds due in 30 years, an unusually long term for bank debt, but JPMorgan's second 30-year issue in nine months, according to IFR, a Thomson Reuters capital markets service. TAKING TIME WITH MORTGAGES Mortgage costs were down slightly, but Dimon cautioned that the housing market was still working through difficulties. "Unfortunately, it will take some time to resolve these issues and it is possible we will incur additional costs along the way," he said. JPMorgan expects to have to repurchase $3.6 billion of mortgages that it packaged into bonds. Such repurchases are usually because a bank failed to properly collect payments on the mortgages, or should never have sold them to investors. JPMorgan said it added $1.3 billion to its litigation reserves, mainly for mortgage-related matters. It also continued to add to its loan reserves for losses on mortgages. "It is possible we are very over-reserved in mortgage land," Dimon said in a conference call with analysts. He expects to win a legal battle with the Federal Deposit Insurance Corp over liabilities left from busted lender Washington Mutual, pieces of which JPMorgan bought in a government-arranged deal during the financial crisis. Credit card delinquencies are improving so quickly that the bank drew down its reserves for losses on those balances, adding 15 cents a share to second-quarter profit. The charge-off rate for uncollectable card debt will be down to about 4.5 percent this quarter, nearly a year earlier than previously expected, said Chief Financial Officer Douglas Braunstein. The improvement echoed comments Wednesday from card lender Capital One Financial Corp. JPMorgan has been hiring people to work out its problems with mortgages, still the biggest drag on its business. The bank said it hired 10,000 people in the second quarter. It has 250,095 people as of the end of June. Compensation expenses slid in the last three months as pay for employees in the investment bank declined 22 percent from the first quarter when trading revenue shrank. Compensation costs at the investment bank fell by $730 million to 35 percent of revenue, down from 40 percent in the first quarter. "When revenues are down, JPM manages to bring down their costs faster than everyone else. That really did cushion some of the earnings decline," said Credit Suisse analyst Moshe Orenbuch.

RIGGED SYSTEM

Brazil's Finance Minister Guido Mantega said Brazil backed Lagarde because she vowed to continue raising the profile of emerging markets. "Our support is for her to be a manager not of Europe's problems but of the world's. We will be watching out for this from the first day," Mantega said at a regional trade meeting in Paraguay. In justifying why India had gone with Lagarde in the end, Indian Finance Minister Pranab Mukherjee told Reuters it was in part because it wanted to be part of the concensus that had formed around her. Speaking while on a visit to Washington, Mukherjee said the IMF's selection process should have been more transparent but he believed Lagarde was a worthy candidate. Arvind Subramanian, a senior fellow at the Peterson Institute in Washington, said emerging economies had missed a golden opportunity to force change at the IMF helm by failing to rally around Carstens or by putting up their own consensus Candidate. It is a rigged system that needs to change but ... The only reason the outcome didn't match what (developing nations) wanted was because emerging market countries did not grab the opportunity," Subramanian said. Global development group Oxfam said Lagarde's appointment was "farcical" and had damaged the credibility of the IMF. There were noises made about openness, but the decision was made before the candidates were interviewed," said Sarah Wynn-Williams, Oxfam's head of relations with the IMF and World Bank.

AAI Eyes Funds For Expansion

After the announcement of major fleet expansion by domestic airlines at the Paris Air Show, India's airport developer Airports Authority of India (AAI) is desperately seeking more funds to keep pace with the robust growth that is expected to take place in the sector in the next five years. AAI has sought additional funding to keep pace with the fleet and traffic expansion expected in India over the next few years. AAI, which invested around Rs 1,200 crore in modernisation projects last year, is working on 14 greenfield airports in India, which have been granted in-principle approval. Airline companies from India have ordered one-third of the total airplane orders placed during the Paris Air Show last week, with IndiGo finalising orders for 180 jets and GoAir for 72 Airbus jets. Jet Airways has placed orders for 49 aircraft while low-cost carrier SpiceJet had signed a deal with Boeing to acquire 30 Boeing 737 at an estimated value of $2.7 billion. India's airlines have placed orders worth $40 billion, but aviation experts have pointed out that poor infrastructure, debt, high fuel taxes and rising interest rates would be disturbing for the airline industry in India. Last year, out of its total expenditure of Rs 2,700 crore, AAI spent Rs 1,200 crore on face-lifting of the non-metro airports. The AAI has already disclosed plans to borrow Rs 900 crore this year and Rs 800 crore next year to fund the upgradation of 10 non-metro airports out of the total 35 such airports. The AAI had raised about Rs 550 crore last year via bank loans and guarantees but was not allowed to issue bonds by the finance ministry. It is also exploring funding from the World Bank.

RBI Sets New Rules To Prevent Fraud

Money can corrupt a man's mind. If he sees too much of it floating around, he'd probably want to grab a handful of it. Take for instance the banking business. It's a place that's constantly dealing with huge sums of money. Think about the huge risks associated with it. It is no wonder that time and again banking frauds by rogue employees have led to major bank collapses. In India, just a few months back, the relationship manager at the Gurgaon branch of Citibank India was found to be involved in a multi-crore fraud. The risks will never go away. What one can do is build robust systems with effective controls and checks. Our esteemed central bank, the Reserve Bank of India (RBI) has chalked out new set of rules for banks that would help prevent frauds and irregularities. The RBI has directed banks to frame staff rotation and leave policies for employees working in sensitive areas of the banks such as the treasury department and also relationship managers handling the accounts of high-value clients. Staff rotation and leave policies are popular international practices that enable banks to keep a tab on the decisions taken and work handled by their employees. Such practices help create proper checks and act as deterrents against any wrongdoing that employees may be tempted to be part of. According to a notification by the RBI, these new rules have been introduced on the back of certain forensic studies at some banks due to the "occurrence of large value frauds or sharp increase in number of frauds at such banks". Additionally, the central bank has asked private and foreign banks to appoint chief of internal vigilance (CIV) officers. The responsibilities of these officers would be akin to those of chief vigilance officers in public sector banks. We believe that the RBI's move has been timely and will go a long way in strengthening the Indian banking system.

Options, Not Cash Is King On D-Street

Options trading, a form of derivatives trading has become the game changer for the Indian capital market, forcing broking houses, which have built huge capacities to deal in the cash market, to rework strategies. Options trading constitute about 64 per cent of the total trading volume in the market in 2010-11, while the cash segment has turned minuscule, with just under four per cent. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset (share or bond) at a specific price on or before a certain date. All this happened in the last 10 years, since 2000-01, when the cash segment commanded 99.9 per cent share of total volumes. The remaining was accounted for by the futures market. Last fiscal saw futures and options (F&O) together clocking a market share of 96.4 per cent, bringing down the share of cash market to just 3.6 per cent. Futures trading alone commands a share of 32.5 per cent. "The key driver for such phenomenal growth of the options market may be attributable to the fact that starting 2008-09, the brokerage and STT (Securities Transaction Tax) in the options market is being charged on the 'Premium' portion, than on the 'Entire Open Interest'( deal size)," said Jagannadham Thunuguntla, strategist and head of research of SMC Global Securities. The volumes of the cash segment fell from Rs 28.8 lakh crore in 2000-01, to Rs 11.08 lakh crore. On the other hand, the options market has grown Rs 193.96 lakh crore last fiscal, from almost nil in 2000-01. Futures market rose from Rs 4,041 crore to Rs 98.53 lakh crore during this period. "Though overall volumes have gone up in the market, the incomes of brokerages have not seen a commensurate growth, mainly due to shift in trading to derivatives," Thunuguntla added. Commissions on derivatives trading are lower than that in the traditional cash segment. The period 2001-02 to 2007-08 is considered the 'Era of Futures' (A financial contract obligating the buyer to purchase an asset or the seller to sell an asset, at a predetermined future date and price), when the futures trading grew from 7.4 per cent share of total trading volumes to 62.9 per cent. This was followed by the 'Era of Options', when its turnover shot up from 9.3 per cent in 2008 to 63.9 per cent last fiscal. Clearly, the cash market, where real shares are traded, has lost out in the race. Alex Mathews, research head of Geojit BNP Paribas Securities highlights the leverage that options give over the cash market as the main advantage of the former. "In the cash market, one has to pay the deal price, while an options buyer has to pay only the premium, which is around seven to eight per cent of the deal size," Mathews explained. For example, for a deal size of about Rs 2 lakh, an options buyer pays only about Rs 7,500. Thus, through options, one can take exposure to shares worth six to seven times the amount in the cash market. While trading and speculation strategies are possible in the cash market, options market provides opportunities in the volatile market and enables skimming arbitrage opportunities, too. "Options also enable trading with lower risk compared to that of futures," Mathews added.

Loan Rates By Some Banks

The Reserve Bank of India today announced a hike in key policy rates in its bid to tame the raging inflation figures. The central bank raised the repo rate, its main lending rate, by 25 basis points to 6.75% and raised the reverse repo rate, or borrowing rate, to 5.75 %. Repo is the rate at which banks borrow from RBI and reverse repo is the rate at which banks park their surplus money with RBI. In the last one year RBI has raised rates eight times in small doses; the repo rate from 5% to 6.5% and reverse repo from 3.5% to 5.5%. With the rate of bank borrowing from the RBI going up 0.25%, will it translate into a loan rate hike for commercial bank borrowers? Experts say bankers are unlikely to hike their deposit or lending rates, as most banks had already raised their prime lending rates (PLRs) and deposit rates significantly in the last three months. Also, the prevalent lending rates are high enough and another round of lending rate hike and borrowers would not be a position to absorb further rises. Below is the existing loan rates by some leading banks Central Bank of India 13.75% Corporation Bank 13.60% Dena Bank 14.50% Dhanlaxmi Bank 17.25% HDFC Bank 17.25% ICICI Bank 17.50% IDBI Bank 14.00% Indian Bank 13. 75% PNB 13.00% SBI 13.00% So, fear not, for the time being loan rates will continue to remain the same. Go ahead and buy that car.

Tax Benefits

Philatelic Investments is the investment in collectible postage stamps for the purpose of making profit. It requires a lot of expertise and is a very risky form of investment. Hence for those interested in investing in stamps, gaining knowledge about classification, condition grading, authentication, handling and storage, the stamp market and philatelic literature is of utmost importance. Unlike the share and stock market, philatelic investments take place informally and thus it is difficult to estimate the size of this market. There is a common misconception that nobody collects stamps anymore, but in reality, more people are into collecting stamps than anything else. Investors in stamps can be thought of in three broad categories- pure investors; those who are purely interested in investments and making profit from it, stamp collectors; who collect without really thinking of the investment potential and then there is the category in between the two; those who invest to make money, but have fun doing it, even if it is at the risk of their investment objective. In 2009, an estimation suggested that there were about 48 million collectors worldwide, 18m of whom are part of the rapidly growing market in China. Indian philatelic market is also growing rapidly and it is expected to surpass Chinese markets in the next decade. Like all commodities, the value of a stamp is determined by the forces of demand and supply. These depend on a variety of factors like the number available, the condition in which it is preserved, the expectation on its future value, the place of purchase etc. These factors are summarized as follows: * Country (or area) of issuance: Most stamp collectors within any given country collect their country's stamps. Some collectors collect specific areas or regions. * Topical appeal: Many stamp collectors focus on stamps which picture particular popular topics, such as Sports, Nature, Art, Religion, Space Exploration, etc. * Perceptions of value: These refer to its current value and the expectation of its future value to increase or decrease One can buy or sell stamps informally from the internet, auctions, private sales of a collector, stamp dealers or from specialised stamp investment firms. The Internet has made collecting stamps very easy, with stamps featuring as the popular category on eBay. There are many stamp dealers all over the world. However dealers that maintain a good collection of stamps are few. Most dealers acquire stamps through private sales or auctions. Many auctions are available online as well, allowing investors to bid from all parts of the world. Stamp investment can be seen as a long term investment. It should not be considered in case you want to get returns quickly. It is said that a good stamp should be held for at least 5 years before selling. When the time comes for sale, there are specialist dealers and auctions for this as well. Advantages of philatelic investments There are many advantages of this type of investment. Firstly it is a convenient form of tangible investment because it is highly portable and easily transportable. Philatelic investment is a good portfolio diversifier; there is very little correlation between the performance of stamps and the performance of other asset classes like stocks and bonds. And hence philatelic investments allow investors to benefit from risk diversification. Another important advantage is its liquidity; there will always be a buyer for a good collectible stamp. In times of inflation, stamps by way of not being financial asset may perform much better than cash. Disadvantages of philatelic investments This investment also comes with its disadvantages. As mentioned earlier, it is a fairly risky form for someone new and it requires a lot of expertise. There is no guarantee of return on such investments. The cost of buying collectible stamps is much higher than most other forms of investment. The costs related to selling are also relatively high. Because stamps are tangible items, they may need to be insured. They are at a risk of physical damage and deterioration. Though they are liquid assets, finding a buyer may take time as there is no formal means of trading for such kind of investments. Forgery of stamps is very common and expert evaluators may charge a high fee. Stamps have little intrinsic value, unlike other alternative assets like gold or silver. The future of this form of investment is uncertain because the existence of stamps per se is questionable with the shift to electronic means of communication. Another important drawback is that unlike most other investments, stamps do not generate any interest or dividends.

Bad Credit Home Equity Loan

Most people with bad credit do not realize that if they own their own home and are paying off a mortgage, they can qualify for a home equity loan. Even with bad credit, a home equity loan is a possibility, because the home itself is collateral. If you default on the payments, you will lose your home, just as you will by not making your mortgage payments. As long as you have been making every effort to keep the payments on your home up to date, most lenders will approve a loan based on the equity you have built up over time.
You do need to have 20 percent or more of your mortgage paid off. If this fits your situation, even though you have bad credit by not making other payments on time or by missing them altogether, with your bad credit, a home equity loan is possible. You also have to provide proof of your income and ownership of the home. The lender will also require an appraisal to determine the exact value of your home and thereby determine the amount of equity you have. The equity is the difference in what you owe on your home and the amount of money you would get if you sold it.
If you have bad credit, a home equity loan would be about 80% of the equity. Although there are lenders who will give loans for 125 percent of the equity, if you have bad credit, it is not likely that you would qualify for this larger amount. The lender will also want to know how you plan to spend the money. If your answer is that you want to consolidate your debts and make improvements to your home, then the chances are high that you will be approved.
With bad credit, home equity loan lenders want to make sure you will repay the money. With the bad credit rating that you have, they are taking a risk lending you a large amount of money. Therefore, the interest rate you pay on the loan will be higher. There are closing costs associated with getting this type of loan, but they are not as high as getting a regular mortgage. Just like with getting a mortgage, you can have these costs included in the loan, so you dont have to come up with money up front.
There are many lenders with an online presence where you can apply from home. It is best that you apply to several lenders and then you can compare the rates, terms offered and the payment amounts. By applying to several lenders over the space of a few days won't damage your credit record. Any creditors who check your record will see that you are checking out which lender can give you the best deal. Using the money from the home equity loan to pay off your outstanding debts is a good idea. When you make your payments on the loan on time, your credit rating will start to rise. You will not notice the difference immediately, but after six months or a year, there will be a significant difference.

Loan Modification Option

The Loan Modification options provides for either a permanent change in one or more of the terms of a mortgagor's loan, which allows a loan to be reinstated and results in a payment the mortgagor can afford. Find out if you are eligible and the procedures by reviewing this helpful information published by the U.S Department of Housing and Urban Development.
Whether or not you are eligible under HUD guidelines, rates and terms as well as qualifying for a loan modification are at the lenders discretion. You have choices on how to go about attempting to modify your existing mortgage and you can certainly try it on your own as many do. If you would like the forms, example of hardship letters along with some sound advice, contact us and we will be more than happy to provide it for free.
Some homeowners that are struggling with their mortgage payments or facing foreclosure may choose to hire a real estate attorney or search loan modification companies rather than going it alone due to the fact an attorney may drive a more positive result, or other avenues have failed. Navigating through the mortgage lender's loss mitigation department can be difficult at times, similar to the stories told of the Bermuda Triangle. I mean things just disappear! Keeping in mind the lender or loan servicing company is just trying to collect a debt and make a loan perform for the investor.
Debt collections is different than loan modifications being that people have been collecting debt for over a couple hundred years and doing loan mods for 6 months . I have heard horror stories from clients just trying to get through to loss mitigation departments by phone or worse yet once contact is made; lost faxes, poor results, declines, unaffordable forbearance agreements, or going into foreclosure.
Remember...the lender is mainly trying to collect delinquent payments, not give you 2.50% fixed for 5 years on a 5.00% 30 year fixed and knock $100,000 of your principal loan balance. Yes, these things may be possible. They are done on a case by case basis and must be properly negotiated to get the most favorable short and long term results. Hiring a qualified attorney is usually going to get better results.
Be very careful when doing a loan modification!
In many cases we have seen clients hurt themselves by telling or showing the lender certain things they should not. You must understand, the personnel in the loss mitigation dept. are highly trained at negotiating and collecting past due mortgage payments. This is why the lender will normally not consider a modification unless you are 3 or more payments behind.
This is why the lender wants to see you have some money available to send them immediately and they will consider a modification after 3 months of higher payments made on time. Unfortunately, most of the time we see clients have defaulted again thus causing more fees and possibly back in the foreclosure process.
A loan modification is a long term solution, modified forbearance agreements are designed by the lenders to just get paid. Of coarse they will negotiate with you to get caught up, requiring a portion of the arrearages to be paid up front to reinstate the loan or to stop foreclosure.
Be Very careful doing a loan modification with a Loan Modification Company!
There are several loan modification companies/loss mitigation companies advertising success rates, money back guarantees, large principal reductions, 4.50% 30 year fixed rates and I can go on and on and on. A company in Los Angeles boasts a "Home Equity Leveling program where you pay them $1500 up front for processing then 1% of the loan amount when they get you a huge principal reduction, with NO CREDENTIALS. Please!
The worse I have heard was a company that tells you they freeze your payments for 5 months and you make reduced monthly payments to them while they negotiate with your lender. I mean, this so called attorney backed loan modification company is getting home owners to pay the ridicules monthly fees and getting no results. Let's put it like this, just check with the Attorney Generals Office as there has already been cases filed against stop foreclosure and loan modification companies.
I am not saying that everyone's dishonest or will stop at nothing to get a sale; I am just saying that few are operating legally or know what they're doing. Make sure to do your research, ask questions, and ask to speak with the attorney or better yet what his name is.
It's unfortunate that most home owners are stuck in this spot in the first place that they would be taken again. Several loan modification companies boast the fact that an Attorney handles the negotiation or they are "Attorney backed" "Attorney Assisted". "Attorney Based" or "Our In House Attorneys". The sales people have titles like "Loan Modification Specialist",Loan Modification Expert" or "Stop Foreclosure Consultant" I find this quite amusing.
Now, I may be partial because I am an attorney and my law firm hires only experienced attorneys, paralegals and bank negotiators to handle client's files. But the truth is, my staff is compassionate and knows what they're doing. They know what a loan modification looks like and how to negotiate with the lender. Better yet, you are working with a law office.

What's a real loan modification look like?

It should look like a 30 year fixed rate between 5.00% and 6.00% allowing a borrower the long term ability to pay. If that is not affordable to the client there are other options depending on the investor, who is servicing the loan and the extenuating circumstances.

Modifying the terms of the existing mortgage may also include a discounted rate fixed for a period of 3 to 5 years then gradually increase to a fair market fixed rate up to 40 years.

A lender may also opt to reduce the principal balance or forgive part or all of a 2nd mortgage if presented with a valid case. Basically, a real loan modification will look like a reasonable long term solution for both parties, creating a "win-win" solution with a make sense approach.
In certain instances lenders have lowered the interest rate as low as 2.50% due to extreme hardships and the borrowers desire to keep their home.