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Union Budget 2008-09 Presented by P.Chidambram : Highlights..

March 01, 08 by FinanceTurf

Here presents the Union Budgets 2008-09 highlights:

  • Debt Waiver: Total estimate Rs 60,000cr; Overdue loans to be waived will be Rs 50,000 crore. One-time settlement estimated at Rs 10,000 crore; all agriculture loans by RRBs (Railway Retirement Board), co-operatives, SCBs (State Controlling Body) overdue taken before March 2007 and outstanding on December 2007 are covered. Loans waived for marginal farmers holding up to 1 hectare and small farmers up to 2 hectare..

Union Budget 2008-09
Union Budget 2008-09
  • Excise on two-wheelers reduced from 16% to 12%
  • Hikes tax-free income from Rs 1,10,000 to Rs 1,50,000
  • 10% tax on income from Rs 1,50,000 to Rs 3,00,000
  • 20% tax on income from Rs 3,00,000 to Rs 5,00,000
  • 30% tax on income over Rs 5,00,000
  • Women exemption increases from Rs 1,45,000 to Rs 1,80,000
  • Senior citizen exemption increases from Rs 1,95,000 to Rs 2,25,000
  • Banking cash transaction tax to be removed
  • Tax on short term capital gains increased to 15% from 10%
  • Service tax limited hiked to Rs 10 lakh.
  • Reduced general CENVAT (Central Value Added Tax) from 16% to 14%
  • Duties on iron ore exports increased to Rs 3,000 per tonne.

Mr.P.Chidambaram
Mr.P.Chidambaram
  • Project import customs duty reduced from 7.5% to 5%; Steel melting scrap and aluminum scrap made nil; Life saving drugs customs duty from 10% to 5%;
  • No change in peak rate of customs duty;
  • Revenue deficit at 1.4% against budget estimate of 1.5%; To eliminate revenue deficit in Fiscal Year 2010; Fiscal deficit at 3.1% against budget estimate of 3.3%; Plan expenditure Rs 2,43,386 crore;
  • Defence allocation increased from Rs 96,000cr to Rs 1,05,600 crore; Food subsidies at Rs 32,667 crore;
  • Exchange-traded currencies; interest rate derivatives to be introduced;
  • TUF (Technology Up gradation Fund) to increase to Rs 1,090 crore; Rural Infrastructure Development Fund increased to Rs 14,000 crore;
  • Saving rate at 35.6%, investment rate at 36.3 %;
  • Rs 1,000cr to be placed with LIC for covering an additional 1 cr landless households; PAN to be extended for all transactions in financial markets
  • Coal regulator to be set up; GQ (Golden Quadrilateral) completed 96.48%
  • Government to interconnect all national institutions on a knowledge network; Government to establish 16 central universities; 3 IITs in Bihar, Andhra Pradesh and Rajasthan;
  • To continue with fertilizer subsidies, may move to nutrient-based subsidies; Rs 20,000 crore allocated for irrigation; Agricultural credit at Rs 2,80,000 crore; To mobilse Rs 10,000cr for plan capital expenditure;
  • ·Rs 16,202cr scheme that will cover at least 33% women.

Budget 2008-09
Budget 2008-09

  • Chennai desalination plant to get Rs 300 cr in 08-09;
  • JNURM (Jawaharlal Nehru Urban Renewal Mission) to get Rs 6,866cr in 2008-09 from Rs 5,482cr in 07-08;
  • Anganwadi workers remuneration to be increased to Rs 1,500 per month.
  • Rs 30,000 cover for unorganized sector; Center to share Rs 200 cr premium; Health allocation increased by 15%
  • Mid-day meal scheme extended in government and government aided schools in upper primary classes. Total coverage of 13.9 crore children; Education allocation increased by 20%
  • 2008-09 should be a year of consolidation; We can; The government will manage capital inflows along with RBI (Reserve Bank of India);
  • Total agricultural output 219.32 million tone. Agriculture growth rate at 2.6% in 2007
  • The next Union Budget will be a vote-on-account because of general elections.

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Preferential Issue, Right Issue (for existing companies)

February 17, 08 by FinanceTurf

This is the practice followed by a company to make preferential allotment of securities to selected persons, who are normally the promoters, etc.

At a price unrelated to the prevailing market price.

The advantage is that funds are obtained at a minimal cost as compared to the public issue or the private placements methods.

But preferential allotments have been sometimes misused by companies.

Currency
Currency

Each shareholder has the right to subscribe to the new shares in the portion of shares he already holds.
The shareholder may either accept the offer for himself or assign a part or all of his rights to another.

Such rights are valuable to shareholders as they are at price below the current market price.
The right issue is an inexpensive and convenient way of raising additional capital as compared to the amount already issued.

A rights issue to the existing shareholders is a mandatory requirement.

The issue of additional shares to other parties without giving the existing shareholders the opportunity to subscribe would reduce the existing shareholders’ proportion of the total capital; i.e.it would ‘water’ their equity.

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Initial Public Offer (IPO) – Most heard about

February 17, 08 by FinanceTurf

Initial Public Offering
Initial Public Offering

Initial public offering, also referred to simply as a "public offering," is the first sale of stock by a private company to the public.

IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.

In an IPO, the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market.

IPOs
IPOs

IPOs can be a risky investment.

For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company.

The IPO can be made by 3 methods which are:-

a) Public Issue through Prospectus – raising the capital by issuing a prospectus to inform and attract the investing public.

b) Offer for Sale – offering the new securities to the investing public by the intermediary like underwriters, merchant banking etc.

c) Private Placement – selling of new securities by an intermediary to selected clients at higher price.

When a company lists its shares on a public exchange, it will almost invariably look to issue additional new shares in order to raise extra capital at the same time.
The money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors).

IPOs
IPOs

An IPO, therefore, allows a company to tap a wide pool of stock market investors to provide it with large volumes of capital for future growth.
The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company.

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Money Market..

February 15, 08 by FinanceTurf

Money market is the market for short term funds meant for use for a period of up to 1 year.
Money market provides means for raising funds for meeting short term requirements so cash on one hand, and the deployment of surplus funds for short periods on the other.

The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time.

Money market trades in short term financial instruments commonly called "paper".

This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity. The money market is not a particular place in a geographical sense.

It is a term to describe all organizations and institutions which deal or facilitate dealings in short term debt instruments.
These instruments include the Reserve Bank, the State Bank of India, other commercial banks, cooperative banks, LIC, GIC, and UTI.

Money Market
Money Market

Common Money Market Instruments are:-

• Banker’s acceptance - A draft issued by a bank that will be accepted for payment, effectively the same as a cashier’s check.

• Certificate of deposit - A time deposit at a bank with a specific maturity date; large-denomination certificates of deposits can be sold before maturity.

• Repurchase agreements - Short-term loans-normally for less than two weeks and frequently for one day-arranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.

• Commercial paper - An unsecured promissory notes with a fixed maturity of one to 270 days; usually sold at a discount from face value.

• Treasury bills - Short-term debt obligations of a national government that are issued to mature in 3 to 12 months.

• Money market mutual funds - Pooled short maturity, high quality investments which buy money market securities on behalf of retail or institutional investors.

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Primary Market

February 14, 08 by FinanceTurf

Primary Market is the market for new long term capital. The primary is that part of the capital markets that deals with the issuance of new securities.

It is the market in which a security is sold for the first time and is therefore also referred to as the New Issue Market (NIM). In a primary issue, the securities are issued by the company directly to investors.

The company receives the money and issues new securities certificates to the investors. The process of selling new issues to investors is called underwriting.

Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business. The primary market performs the crucial function of facilitating capital formation in the economy.

It is through this market that the savings of surplus units are channelled to the deficit units which utilize these funds for investment in buildings, plants, machinery, purchase of technology, etc.

Features of Primary Market are:-

1. This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM).

2. In a primary issue, the securities are issued by the company directly to investors.

3. The company receives the money and issue new security certificates to the investors.

4. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.

5. The primary market performs the crucial function of facilitating capital formation in the economy

6. The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as ‘going public’.

Methods of issuing securities in the Primary Market:-

1. Initial Public Offer;

2. Rights Issue (For existing Companies); and

3. Preferential Issue.



Capital Market

February 13, 08 by FinanceTurf

The capital market is the market for medium and long term funds. It refers to all the organizations, institutions and instruments that provide long term funds.

The organizations and institutions which constitute the capital market include the new issue market, the stock exchange, the mutual funds, insurance companies, investment banks.

The capital market mainly focuses on meeting long term financial needs of the business sector.

Global Market In Hand
Global Market In Hand

The business enterprise utilizes this market to procure finances for long term investments, such as buying plant ,machinery ,buildings, etc. funds in the capital market are raised by issuing a wide variety of securities which includes :-

• Equity shares or ownership securities
• Debentures or creditor ship securities
• Preference shares or securities having preferential claims
• Other innovative securities which are variant s securities, with new features added to provide a wider choice to investors.

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