Nominee for your investments

Many of us invest in shares, deposits and mutual funds without bothering to fill up the nomination details. Since choosing a nominee is not mandatory while making an investment, the decision is often postponed.

However, this process simplifies for nominees the realisation of investment proceeds in case of the original investor’s demise. This is even more critical when an investment is held in one person’s name since death makes it difficult to access his fund still several formalities are completed.

If nominees have been appointed, they can produce basic documents, such as a death certificate, to access the funds. The absence of a nominee may require more documentation, such as the probate of will and certified list of legal heirs, before the investment can be transmitted or withdrawn.

Nominees are deemed to hold the investment proceeds in a trust if it is disputed by legal heirs, pending a decision by the courts.

Documentation: Most investment forms provide a space for selecting a nominee. If it is not filled up at the time of investing, other prescribed forms can be used later.

Multiple nominees: Most investments allow more than one nominee and the percentage of share that each would be entitled to.

Signature: The nomination form has to be filled up by all joint holders, irrespective of the mode of operation of the investment.

Transmission: Nominees can have investments transferred in their names for redemption later. For this, they need to complete the KYC and PAN formalities.

Points to note

Who cannot nominate: Kartas of HUFs and power of attorney holders are not authorised to make or change nominations or be appointed as nominees to an investment.

NRIs: Non-resident Indians can be named as nominees of investments made in rupees. However, the proceeds cannot be repatriated and have to be continued to be held in rupees.

Who can be the nominees: Certain investments permit the nomination of a trust, religious or educational institutions. Others only permit individuals to be nominated.

Reduce tax on your retirement benefits

Perhaps one of the most ignored challenges after retirement is to manage your benefits. Ironically, you are anxious about everything else: the sharp fall in income, life without colleagues, lack of drive, and so on. 

But for obvious reasons, you are excited about the benefits—provident fund, gratuity, leave encashment, superannuation fund, etc. 

However, not all these returns are exempt from tax. So, it is important to distinguish the ones that are tax-free from those that are not. You should also be aware of ways to steer clear of such tax ‘traps’. 

If you are a government employee, there can be a marked difference in the way your funds are taxed. “There is tax exemption on certain receipts such as commuted pension, gratuity, leave encashment, etc. 

Private sector employees are generally taxed on the basis of prescribed rules. Let’s take a look at the taxable and tax-free benefits and learn how to reduce your burden. 

Provident fund: 

It is completely tax-free. However, ensure that your office invests it in a recognised provident fund. Unrecognised provident funds have different tax structures compared with the recognised ones. Further, the employer’s contribution and interest credited to such funds are taxable as income in the year of receipt.

When it comes to the Employee Provident Fund (EPF), the interest and amount paid at retirement are not tax-free if your employer had been contributing more than 12% of your salary to the account. Similarly, the interest “credited in excess of 9.5% per annum is included in gross salary.

The benefits of working continuously for five years with an organisation are widely known. The payment of accumulated balance from a recognised provident fund (RPF) is taxable unless the employee has worked continuously with a firm for five years.

However, if you know you are going to retire in less than five years of joining a new company, you can secure tax-free RPF on retirement by making sure you transfer the EPF account from the previous company to the current one.

Gratuity:

This is one corpus where government employees have an edge over others. Gratuity is a lump-sum payment made by an employer for long and meritorious service rendered by an employee.

Any amount that the government employees receive is exempt from tax, but there is a cap for non-government staffers. For employees covered under the Payment of Gratuity Act, the cap is the least of the following: a) actual amount received b) 15 days’ salary for each year of service c) Rs 10 lakh. 

The salary for 15 days is calculated by dividing your last drawn salary by 26, which is the maximum number of working days in a month.

There could still be situations when you end up paying tax on gratuity. Any gratuity received by an employee who is covered under the Payment of Gratuity Act and has worked for less than five years is fully taxable.

The clause, ‘completion of the five years’ service’ is not applicable in the case of death or disablement of an employee.

 Also, employees who are not covered under the Act do not have to complete five years of service to get tax-free gratuity. 

Superannuation fund: 

The amount received as superannuation is exempt from tax if it is paid on death, retirement, in lieu of or as annuity. 

Any commutation of pension is exempt up to one-third of the commuted value of pension, where the employee receives any gratuity and half of such value otherwise.

The interest that is accumulated on the superannuation fund is taxed under certain circumstances. “This exemption is not available if the employee resigns.

The escape route in cases where the amount becomes taxable is to purchase SAF (state annuity fund)-related annuity without any commutation.

 If you don’t do this, TDS (tax deducted at source) will be applicable on the average rate at which the employee was subject to during the preceding three years or during the period, if it is less than three years, when he was a member of the fund.

 The rest of the amount is exempt from tax only if annuities are purchased from life insurance companies.

Leave encashment: 

The tax treatment of leave encashment depends on the status of the employee as well as the point at which the leave is encashed, that is, during employment or at the time of retirement.

Leave encashment during the period of employment is taxed, but not at the time of retirement or leaving a job.

Any amount received as leave encashment by the state or central government employees is exempt from tax. However, the bar is stricter when it comes to others. 

The amount of encashed leave that is exempt from tax is the lower of Rs 3 lakh and the amount paid according to a calculation specified by the Income Tax Act. 

The taxable portion of leave encashment would form a part of the normal salary income and would be taxed as per the normal slab rate applicable to the employee. There is no special rate for this.

Voluntary Retirement Scheme:

VRS is applicable only to those employees who have completed 10 years of service or are over 40 years of age. 

When you opt for the voluntary retirement scheme, the company will pay you a compensation, which is tax-free if it is lower of the two: Rs 5 lakh or the last three months’ average salary multiplied by the number of years of service. 

Beyond that, it is added to the income and taxed accordingly. 

There are ways to avoid being slotted in the higher income tax bracket because of the hefty compensation paid in the year of retirement. This exemption is also available if the VRS amount is paid in installments spread over several years.

Staggering this amount would mean that the employee not have to pay the entire tax upfront but is subjected to TDS as and when the installments are paid.

Moreover, employees will also benefit from the interest on the outstanding VRS amount at a rate much higher than the market rate and from a safe source: his erstwhile employer. 

How to get out of a bad insurance

A life insurance policy is a key component of a financial plan. Chosen well, it safeguards the financial future of a family if the breadwinner passes away. If, however, it is bought for the wrong reasons, the same policy can become a drain on resources and prevents the policyholder from meeting crucial financial goals.

A lady entrepreneur told me that she is paying a premium of Rs 1.06 lakh a year for six policies that gives her a combined cover of Rs 20.4 lakh. "I feel I have over invested in insurance. These plans take up a huge chunk 

of my savings. I must resort to some course correction here," she says

.

My solution to her

Of her six policies, an Ulip offers her a reasonably high cover of Rs 12 lakh for a premium of Rs 30,000. If she discontinues the other policies, she will free Rs 76,000 every year. Of this, Rs 22,000 can be used to buy a term plan of Rs 90 lakh for 20 years, and the remaining Rs 51,000 can be invested in other asset classes.

One of my friend who is agonizing over his inability to save enough for his dream house. "I'm in a financial mess. My insurance policies take up too much of my savings, leaving me with very little for my house" he said to me. 

Worse, it leaves this sole breadwinner grossly underinsured. He is getting very low coverage at a very high cost. 

The high premium outgo not only prevents him from investing in other asset classes but also leaves him underinsured. His current life insurance is just one-fifth of the required cover of Rs 1 crore.

Getting stuck with an unsuitable insurance policy is a malady as widespread as the common cold. There's one wrong insurance policy in almost every household. A few buyers realize their mistake, but most policyholders don't. You can, however, find out whether your insurance policy suits your needs. Many blame the agents for their predicament. However what I found Very few investors spend time on understanding their policies and features as it is very much important to buy the right plan that suits your need. Buying anything blindly on the basis of high projected returns is not a wise thing.

Another young chap feeling depressed for his investment in ULIP’s. Despite the rise in the stock markets, his fund value is lower than the amount invested by him. Besides, he does not need insurance because he is a bachelor with no dependents.

My Solution

 He should stop paying the premium for Ulip and traditional plans and surrender them after five years. Thus he can free Rs 67,500 a year. However, he can continue with the pension plan. When he gets married, he should buy a term insurance plan of Rs 1 crore for 30 years. This will cost him around Rs 13,000 a year.

 What do you do if you find that you have the wrong insurance?

Escaping from an insurance policy entails a very high cost. You can lose up to 50% of what you have paid. In extreme cases, you might have to forfeit your entire investment. This is what keeps people from junking a plan, however unsuitable it is. There is a psychological barrier of losing money, which is why people avoid exiting an insurance policy. But it is better to incur a loss at the initial stage rather than continue and compound the mistake.

Mr.Arun Singh In the past three years has picked four insurance policies to save tax. He is paying Rs 42,000 for a cover of Rs 6.75 lakh! Tax-saver plans are a burden to him!!!

Another example: Mr.Vinod Dubey is a homoeopath & the sole breadwinner of his family, he is grossly underinsured. He needs a cover of at least Rs 60 lakh. Three of his policies are traditional plans that offer very low returns. The fourth is a Ulip that provides a very low cover. The premium outgo prevents him from executing his plans to buy a house.

My solution:

 He should convert his traditional plans into paid-up policies after paying the premium for three years. This will free Rs 26,000 a year. He should stop paying the premium in case of the Ulip and surrender after five years.

Now the big question is what is or what are the ways to stop this?

Option I:

Let the policy lapse

Don't pay the premium and the policy ends automatically.

This is the easiest way to exit a policy. It is also the costliest if the policy has not completed three years. The premium paid in the first two years is forfeited and the policy ends. You also stand to lose the tax benefits availed of in the first two years on the premium payment. You get nothing, except freedom from the policy.

Financial planners say this option should be chosen only if you realise that the policy is grossly unsuitable to your needs. If the policy doesn't meet your objective, it is better to let it lapse even though you stand to lose the premium for 1-2 years. It's much like junking a bad stock to minimise the loss and move on to a better investment.

The rule is different for Ulip. Even if it is discontinued after the first year, the policyholder is entitled to some amount after paying surrender charges. However, this sum comes to him only after the lock-in period of five years (three years, if bought before 1 September 2010). The fund value, after imposing all charges and penalties, is frozen in the account and earns 3.5% returns till this period.

The investor gets the money only after completion of five years now. The policies that are most likely to be allowed to lapse are traditional endowment and money-back plans. There's a widespread perception that they are a good way to save for the long term and cover against the risk of death. In reality, these plans offer very low returns and provide too little cover. The average return on traditional policies is 5-6%, which doesn't even beat inflation.

If anyone has taken a 20-year Ulip last year for an annual premium of Rs 34,000. It covers him for around Rs 2 lakh. If he were to let it lapse this year, he will not lose the entire premium. He might be better off if he buys a term cover of Rs.50 lakh for an annual premium of around Rs 8,000 and invests the remaining Rs 26,000 in some other option such as a Bonds, in metals, mutual fund or in a fixed deposit as per his risk appetite.

Option II:

 Surrender the policy

After three years, an insurance policy fetches a surrender value. Remember, the surrender amount is calculated over its actual premium!

If you have paid the premium for three years, your insurance policy would have built a reasonable corpus value. So, if the plan is surrendered after this period, the policyholder can get some money back. It will, however, be a fraction of what he has paid over three years because of the surrender charges levied by the insurer. In the third year, the surrender value is roughly 30% of the total premium paid, but this figure goes down as the term of the policy progresses.

Till last year, insurers used to levy very high surrender charges on Ulip in the first three years. But last year, the Insurance Regulatory and Development Authority (IRDA) put a cap on these charges. This is Rs 3,000 or 20% of the annual premium in the first year. For plans with a premium of over Rs 25,000, the cap is higher at Rs 6,000 or 6% of the annual premium. The surrender charges come down progressively to zero in the fifth year. No surrender charge is levied on insurance policies that are more than five years old.

Surrendering a policy gives you some money back, but it also ends the life cover. So, before you decide to junk your policy, find out if you have enough cover. Also, calculate the cost of a fresh insurance policy at the time. You might discover that the premium is very high because you are older.

Option III

Turn it into a paid-up policy                   

Stop paying the premiums, but don't discontinue the policy.

A better alternative to surrendering your insurance policy and losing the life cover is to turn it into a paid-up policy. As in the case of surrendering it, you can use this option only if you have paid the premium for three years and the policy has built up a minimum corpus. Instead of returning the money to the investor, the insurance company uses it to offer him a life cover.

 Every year, it deducts mortality charges from the corpus. However, in case of traditional endowment and money-back plans, this cover is proportionate to the number of years for which the policy was in force. For instance, if a policy offers a life cover of Rs 10 lakh for 20 years and the policyholder converts it into a paid-up plan after five years, the life cover will be reduced to about Rs 5 lakh. On maturity of the plan, the diminished corpus and the accumulated bonus will be given to the policyholder.

This feature has been widely exploited by agents to miss sell Ulip to gullible investors. They would tell investors that they need to pay the premium for only three years and their life insurance policy would continue for the rest of the term. What they really meant was that even if you stopped paying the premium, the corpus would be big enough to sustain the deduction of mortality charges for the entire term.

 Last year, the IRDA issued new rules for Ulip. If the premium of a plan bought after 1 September 2010 is stopped, the policy will be discontinued. This is meant to reduce the incidence of miss Selling.

When it comes to miss-selling, the charges on Ulip is the biggest point of contention. Insurers have brought down premium allocation charges to nil under some plans, but they raise policy administration charges every year or make them a percentage of the sum assured. One should look at these charges too to weed out bad plans from the portfolio.

The paid-up option is by far the best way to exit an insurance policy because it gives the policyholder the best of both worlds. He is freed from the burden of paying the premium that are a drag on his finances, but continues to enjoy the life insurance cover that was the primary objective of the plan.

Option IV: 

Let it continue                                                                  

If close to maturity, pay the premium till the full term.

Of course, if the insurance policy is only 2-3 years away from maturity, one should continue with it for the full term. This is because the painful period of high charges in the initial years has already gone and it doesn't make sense to let go of the accumulated benefits at the end of the term.

If you are finding it difficult to pay the premium, withdraw from the Public Provident Fund or any other long-term investment to pay the premium for your policy.

In this manner, you will not lose the life cover and will be eligible for a tax-free lump-sum payment on maturity. You could also consider taking a loan for this.

How to know if you have the wrong insurance

Low cover: Though insurance needs vary for individuals, a policy should give you a life cover of at least 40 times the annual premium. If it does not, you are paying too much for the cover.

High premium: According to a thumb rule, you need a cover of at least five times your annual income. The premium for this cover should not account for more than 6-8% of your annual income.

Tenure: Insurance is meant to replace the income of the policyholder and should, therefore, cover him for his entire working life. If the policy ends before he retires, it won't be of much help when he needs it most. Buying a fresh cover later will be costly.

Return projections: An endowment policy appears attractive because of the projected corpus on the maturity of the plan. But one must factor inflation into the calculation. In 25 years, a moderate 5% inflation will reduce the value of Rs 20 lakh to a mere Rs 5.5 lakh.


So be careful while choosing your new Insurance.

Resolve your insurance grievances of your own

Few moths back a person who is close to me had undergone two surgeries simultaneously, incurring a total cost of Rs 33,000. When the claim was lodged, the insurance company's third-party administrator held that though the surgeries pertained to two different body parts, these were conducted at the same time and, hence, the eligible claim was only Rs 10,000!!!

Despite explaining that the company would have had to shell out a higher amount had the insured decided to have the surgeries on different dates, the company refused to budge. Ultimately, the person approached the insurance ombudsman, who held that the eligible claim amount was Rs 30,000.

This is not the only instance of insurance companies trying to wriggle out of their commitment to policyholders. You no longer need to rely on the whims of insurance firms. Here's how you can resolve your grievances.

Round one

most insurance companies offer various channels, branch office, phone, and e-mail and snail mail, to register complaints. You can also approach to the company's grievance redressal officer. Insurance companies have to send a written acknowledgement within three working days of receiving the complaint and specify the period within which it is likely to be resolved. If the complaint is resolved within three days, the insurer has to inform the individual along with an acknowledgement. If this is not possible, the company will have to resolve it within two weeks of receiving the complaint and send a final letter of resolution to the aggrieved.

If the insurance company decides to reject the complaint, it has to give a reason, along with information on further redressal avenues that the complainant can pursue. In case you are not satisfied with the insurer's response, you have to inform it within eight weeks, or the company will assume that the complaint has been resolved.

Round two

if the above approach doesn't solve your problem, you can contact either IRDA’s Grievance redressal Cell or the insurance ombudsman, depending on the nature of the complaint. The ombudsman can make recommendations within one month of the receipt of the complaint and give a verdict within three months. If necessary, he can award compensation to the policyholder.

If you are satisfied with the settlement, you have to send your acceptance within 15 days. If the insurance firm does not comply with the order, you can approach consumer forums or civil courts. These offices handle cases dealing with insurance contracts with a value of up to Rs 20 lakh. The ombudsman addresses issues related to rejection or delay in settlement of claims, disputes on premiums, and non-issuance of a document after collecting the premium.

IRDA's Grievance Redressal Cell

Though this cell does not have the authority to pass orders, complaints addressed to it are taken up with the insurers. These could include delay or lack of response pertaining to policies or claims and complaints about agents' conduct. IRDA's toll-free number, 155255, has been publicised widely to create awareness about the recourses available to policyholders. One can approach the cell directly, and where required, you will be redirected to the ombudsman under whose jurisdiction the complaint falls."  

Ensure that you send the complaint yourself as the ones forwarded by third parties, including lawyers or agents, are not entertained by the cell. Also, the complaint should have complete information. So, disclose all the details in the complaints registration form available on IRDA's website @ www.irda.gov.in

AT YOUR SERVICE

you must first register your complaints with the insurer. You can approach the ombudsman only if you have not received any feedback from the insurer or are not satisfied with the given response.

After you have received a copy of the ombudsman's recommendations and are satisfied with it, you have to send a written communication, indicating your acceptance within 15 days.

The ombudsman handles cases with a value of up to `20 lakh and has the authority to mediate and give a recommendation, or award compensation, which is binding on the insurer.

You can also get in touch with the Insurance Regulatory and Development Authority's Grievance Redressal Cell through a toll-free number (155255).

The ombudsman does not hear matters related to the conduct of agents. This can be taken up by IRDA’s Grievance Redressal Cell.

You can approach the civil and consumer courts directly to resolve your grievance. However, the ombudsman will not accept your case if it is pending with other courts. 

$ dream

Foreign direct investments in the country more than doubled to $4.66 billion in May from $2.21 billion a year earlier, indicating investors’ confidence in the Indian economy. The investment, the government said, was the second highest monthly inflow in 11 years, and the upward trend was likely to continue this fiscal. Going by the rate at which investments have come in during the first two months of this fiscal, the full year may see a total of $46 billion — more than double last year’s figures. Some of this increase would be from major merger and acquisitions waiting to be approved, officials said. “The slowdown in foreign direct investment appears to have been reversed in the current financial year, where a significant upward trend is evident,” officials said. In the April-May period of the current fiscal, FDI went up 77 per cent to $7.78 billion from $4.39 billion in the corresponding period last year. “The sudden surge in inflow could be due to the government’s efforts to review the double taxation treaty… perhaps funds are coming back before curbs come into play. There has not been any big ticket investment during the period and the economic numbers have also not been encouraging,” N.R. Bhanmurthy of the National Institute of Public Finance and Policy said. In the previous fiscal, equity inflows through FDI had dipped 25 per cent to $19.42 billion. The government expects the upward trend in FDI to continue this fiscal. The proposed tie-up between British Petroleum (BP) and Reliance Industries, with a likely FDI of over $7 billion, could possibly be the single largest inflow into the country. Vodafone’s purchase of Essar’s stake at around $5 billion, approvals given to Posco and the Cairn-Vedanta acquisition, a deal worth around $8-9 billion, are also likely to substantially increase FDI inflows this year. “There has been a continuing and sustained effort to make the FDI policy more liberal and investor-friendly. Significant rationalisation and simplification of the policy has, therefore, been carried out in the recent past, which seems to have boosted investment apart from the faith in the country’s growth story,” officials said. Meanwhile, FDI data indicate that inflows from tax havens such as Mauritius and Cyprus have dropped significantly during 2010-11. Mauritius has been the most favourite destination to route FDI inflow into the country. While FDI inflows from all sources declined 25 per cent in 2010-11, the drop was steeper at 33 per cent at $6.98 billion from Mauritius. Inflows from Cyprus were down 44 per cent to $913 million. In 2009-10, FDI from Mauritius stood at $10.37 billion against $11.22 billion in 2008-09. FDI inflows from Cyprus in 2009-10 stood at $1.62 billion.

Sri Lanka stock exchange in talks with LSE

The London Stock Exchange is in talks with Sri Lanka’s Securities and Exchange Commission over allowing trading of some of the island nation’s shares on the London bourse and vice-versa, a regulator official said on Monday. An agreement will help Sri Lanka’s selected blue chips to be traded in London, opening up its market to foreign investors. “This is still in an initial stage. We hope to progress after the discussion and if it happens, it will be a great opportunity for Sri Lanka,” Malik Cader, director-general of the SEC, said on the sidelines of a national economic forum in Colombo. Cader declined to comment on the time frame for the process. The LSE, which was forced to abort its $3.5-billion merger with Canada’s TMX Group last week, has links with Sri Lanka after buying Sri Lankan technology company, Millennium IT. The SEC is encouraging foreign companies to list on the Colombo Stock Exchange to get access to trade their shares in the London market. Shares on the LSE ended higher today aided by oil stocks. Gains were limited by weaker banks after Standard & Poor’s warned a potential Greek debt deal would amount to a default. The FTSE 100 index added 27.78 points, or 0.5 per cent, to 6017.54, closing above 6000 for the first time since mid-May.

RBI imposed penalty on Citi

The Reserve Bank of India has imposed a penalty of Rs 25 lakh on Citibank for last year’s Rs 400-crore fraud at its Gurgaon branch perpetrated by a rogue official who was handling the accounts of the bank’s high net worth clients. According to the central bank, Citibank contravened Know-Your-Bank (KYC)/Anti-Money Laundering (AML) guidelines and its failure to follow the norms led to the fraud. The RBI imposed the penalty in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) of the Banking Regulation Act, 1949. The apex bank added that it had issued a show-cause notice to the bank on April 21 in response to which the lender submitted a written reply on May 6. “After considering the facts of the case and the bank’s reply and also oral submissions made during the personal hearings held on June 7, the RBI came to the conclusion that the violations were substantiated and warranted imposition of the penalty,” it added. The fraud at the Gurgaon branch of Citibank was uncovered late last year. An employee of the bank — Shivraj Puri — allegedly diverted close to Rs 400 crore from accounts of 40 high net worth clients and corporate entities. Some of them who were hit by the fraud included the promoters of the Hero Group and Helion Advisors managing director Sanjeev Aggarwal, who alleged that he was duped of around Rs 33 crore. The allegations were that Puri sold investment products to high net worth clients claiming that they would generate high returns. Since then, the central bank has stepped up its vigil against frauds. In order to check such practices, recently the RBI asked public sector bank to immediately report cases of cheating involving Rs 1 crore and above to the Central Bureau of Investigation, and of lesser amount to the police. On the other hand, private and foreign banks have been asked to report cases of fraud involving an amount of Rs 1 lakh and above to the police.

PE investor for Redington

A private equity arm of Standard Chartered today bought close to 10 per cent of Redington India from its promoter and another key investor for a sum of over Rs 365 crore. These shares were acquired from Redington Mauritius, classified as the company’s promoter with the stock exchanges and Taiwan-based Synnex Technology International Corp, a strategic investor in the IT and technology logistics provider. The transaction was done through the bulk deal window of the Bombay Stock Exchange today. Standard Chartered Private Equity, Mauritius bought 3,97,36,500 shares of Redington India for a price of Rs 91.89 per share. Another institutional investor, ECL Finance, acquired 79,50,000 shares at Rs 91.90. The sellers were Redington Mauritius, which offloaded 3,04,80,673 shares, and Synnex Mauritius that sold 1,58,95,000 shares. In all, close to 12 per cent of Redington’s equity changed hands. The purchase price marks a premium of nearly 4 per cent to the closing price of the Redington scrip at the bourses on Friday. Despite the transactions, the Redington stock fell 0.39 per cent to Rs 88.50 on the Bombay Stock Exchange. Shareholding data for the period ended March 31 showed that Redington Mauritius (an arm of Kewalram Chanrai Group from Singapore) held 28.89 per cent of the company’s equity. At the same time, Synnex held 27.80 per cent of its equity. Latest data from the Bombay Stock Exchange shows the promoter’s holding in Redington for the period ended May 27 has come down to 28.80 per cent. It is believed that as a consequence of today’s deal, the stakes held by both these big investors would have fallen below 26 per cent. This is the second action coming from a PE player over the past few days. Recently, Apollo Global Management, the private equity firm, announced that it is investing Rs 2,250 crore ($500 million) in the Welspun group. The investment will be made in steel pipe maker Welspun Corp Ltd (WCL) and two other companies in the group that included Welspun Maxteel Ltd and Welspun Infratech Ltd.

Tata bid to take off in aerospace

The $70-billion Tata group is quietly building its presence in the aerospace industry that has recently seen significant investment from the private sector. It is in the process of applying for licenses from several central government ministries, predominantly the defence ministry, to sell helicopters that it plans to assemble at its joint venture with Italian conglomerate Finmeccanica’s AgustaWestland. The Tata group and AgustaWestland decided in early 2009 to form a joint venture that would establish a plant to assemble the AW 119 helicopter — an eight-seater utility copter meant for both defence and civilian uses. The deliveries were supposed to start by 2011, but the deadline has since been pushed back by a year.  The joint venture was concurrently applying for licences as it went about putting up the assembly unit in Hyderabad. At the time the joint venture was formed, the production target was fixed at 30 units a year. The Centre for Asia Pacific Aviation (CAPA) has estimated that the Hyderabad-based greenfield facility of this joint venture is likely to entail an investment of $30 million. The joint venture company, Indian Rotorcraft, will assemble and deliver these helicopters. It will target domestic as well as global customers. Estimates indicate that India will be a key market for helicopters with an expected demand of 800 units in the next decade from both the public and private sector. Late last year, another Tata group company, Tata Advanced Systems Ltd, rolled out the first made-in-India Sirkorzy S-92 helicopter cabins from Andhra Pradesh. These helicopter cabins, which were previously manufactured in Japan, were exported to Sirkozy’s assembly plant in the US. A recent paper by the CAPA on aerospace manufacturing in India said the Tatas and the Mahindra group with strong financial credentials had entered into various alliances to manufacture parts and assemble machines under offset agreements. “However, there are strong prospects and good reasons for these groups to move from defence offset to licensed manufacturing and beyond to civil aviation manufacturing as the defence market becomes saturated,” it added. Mahindra & Mahindra (M&M) had acquired Aerostaff Australia and Gippsland Aeronautics in 2009 as a part of Rs 1.75-billion investment and capacity building forays into aerospace components and aircraft manufacturing. Recent reports said Mahindra Aerospace Pvt. Ltd, the aerospace unit of M&M, is scouting for a technology partner to make aircraft components at a proposed plant in Bangalore. The CAPA says that the interest shown in aviation by industrial houses suggests a real opportunity for India to develop a presence in international aerospace manufacturing where other developing economies such as Brazil have done well.

Lean years of Osama ‘broke’ Laden - Cash crunch forced Qaida to jump off high horse and order kidnappings: Documents by CHRISTINA LAMB

Osama bin Laden was so short of money during his final years in hiding that he ordered his fighters to kidnap foreign diplomats for ransom, it was revealed yesterday. Documents found in the compound where he was killed in Abbottabad, Pakistan, portray a cash-strapped al Qaida severely hampered by the economic downturn, which had prompted a fall in donations. This was compounded by a freeze on its international assets and an increase in American drone attacks, one of which killed the organisation’s financial director. The terrorist group was run like a multinational business and Osama, like a chief executive, tried to find new sources of revenue and make cuts. Al Qaida went from offering allowances to its fighters, who at one point were paid $108 a month, to leaving militants to pay for their own bed and board. The organisation has a financial wing headed by skilled accountants who insisted on receipts for every purchase, including computer flash drives costing a few dollars. Messages uncovered in the huge cache of documents recovered in Abbottabad make frequent references to a shortage of funds. In one, the head of al Qaida’s security unit complained about having “a very low budget, a few thousand dollars”, an intelligence official told The Washington Post. In others Osama himself complains about lack of money. John Brennan, President Barack Obama’s chief counter-terrorism adviser, told The Sunday Times last week the biggest surprise was that “Bin Laden was far more operationally active and hands-on than we had realised”. But the terrorist leader was also clearly under tremendous pressure, both financially and operationally, from the drone attacks in Pakistan’s tribal areas. “We know from the material from the compound that OBL himself recognised they were being pummelled,” said Brennan. “He wanted to carry out more attacks but his commanders were saying, ‘your aspirations outweigh our capabilities’.” In spring last year, the al Qaida leader sent a message instructing a deputy to form a group that would kidnap diplomats for ransom. Al-Qaida had rarely engaged in kidnapping, preferring to focus on the so-called “spectaculars”, except where abductions could be used as an instrument of vengeance. “It is a simple and clear equation,” Osama once said. “As you kill, you will be killed. As you capture, you will be captured.” With donations drying up it appears he decided to emulate other terrorist groups, such as the Taliban, for whom kidnapping provides an important revenue stream. Terrorist plots can be surprisingly cheap. The September 11 attacks in New York and Washington cost an estimated $500,000, and tens of thousands of dollars in unused funds were sent back by the hijackers to al Qaida accounts. Last year Yemeni operatives boasted that their thwarted attempt to hide bombs in courier packages to blow up two planes cost just $4,500. Brennan said that if it had not been for a tip-off from the Saudi interior minister, Prince Nayef bin Abdul-Aziz, “we would definitely have had a couple of airliners coming down, possibly over the US”. Osama needed cash for training, weapons, operatives and their families, bribes and hideouts, including the compound where he lived with his three wives and children. For years the organisation relied primarily on donors who had known Osama since his days of helping the Afghan mujaheddin to fight the Russians in the 1980s or who regarded him as an inspiration. Such funds were hard to track, coming through the informal money-changing hawala system of brokers in the Gulf and central Asia.

Courtesy- THE SUNDAY TIMES, LONDON