The Securities and Exchange Board of India (Sebi) is likely to intervene in the upfront commission issue. The industry trade body, Association of Mutual funds in India (Amfi), recently sought guidance from the market regulator to ensure that the industry complies with the 1% cap on upfront commission.

UK Sinha, chairman of Sebi, on Monday confirmed that the regulator has received a letter from Amfi on the issue of commission. But he didn’t elaborate on how Sebi will deal with it. Sinha was speaking on the sidelines of the NSE India ETF Conference 2015.

Amfi had asked fund houses to cap the upfront commissions at 1% from April 1, 2015. However, a few small fund houses had criticised it for taking the decision without proper consensus.

Officials in the mutual fund industry said the market regulator might bring in some guidelines on the commission issue. At the CII Mutual Fund summit in June 2015, Sinha had criticised the mutual fund industry for not demonstrating self discipline on upfront commissions. “Nothing stops us from stepping in. But in my view, we should refrain from taking action unless it is warranted because when Sebi takes action into how much commission should be paid and not paid, it will be number one very harsh and impact large number of players and doing it away would be difficult,” Sinha had said.

In the past few days, a few fund houses asked Amfi to look into the issue of various fund houses giving more than 1% upfront commissions.

“We need a level playing field. Currently, many are adhering to the cap of 1% on upfront commissions, while there are few players who are clearly not following the Amfi’s guidelines. We hope that the regulator will come out with some norms that are followed by all the fund houses,” said a CEO on the  condition of anonymity.

While the upfront commissions were capped at 1%, fund houses usually pay trail commissions in the range of 0.75 basis points (100 basis points = 1%) to 1.5%. Trail commissions are paid to distributors as long as investors are stayed invested into the scheme. But for now, the mutual fund industry will be keenly looking at some clarity from the regulator on the commission issue.

Eros International Media said on Monday the company had “strong” fundamentals, seeking to reassure investors following a slump in its New York- and Mumbai-listed shares after an analyst raised questions about its business operations. (Photo: PTI)

Eros International Media said on Monday the company had “strong” fundamentals, seeking to reassure investors following a slump in its New York- and Mumbai-listed shares after an analyst raised questions about its business operations.

Shares of Eros International Media, a producer and distributor of Indian movies, slumped as much as 20 per cent on BSE on Monday. Its parent company, Eros International Plc , lost 16.6 per cent in US trading on Friday.

The falls came after Wells Fargo, in a report on Friday, said Eros had seen a “sudden spike” in hard-to-understand revenue booked from the United Arab Emirates, calling that a “red flag” for some investors and adding it was not fully comfortable with so much revenue coming from outside India.

Wells Fargo also said it was uncertain about Eros’ user count for its ErosNow movie, TV and music streaming application, saying that numbers did not square with public web sites that track app downloads.

Eros, in its India statement, did not directly address Wells Fargo’s concerns, but sought to reassure investors.

“There has been no material change to the previously announced strong fundamentals of the company,” Eros said.

“Our Q1 results have been strong and nothing has materially changed since then,” the company added. “We will be announcing what we expect to be strong second quarter results in the first half of November.”

The Wells Fargo report came after a tough past few days for Eros, after its New York-listed shares slumped 44 percent last week.

Wells Fargo downgraded Eros’ New York shares to “market-perform” saying that a conference call the Indian movie producer had conducted with analysts on Friday morning had failed to provide reassurance.

“We still came away feeling a bit confused so we’re downshifting into a wait-and-see mode,” Wells Fargo said.

Eros enjoyed a hit this year with “Bajrangi Bhaijaan”, a comedy-drama about the return of a mute girl to Pakistan from India that has earned 3.15 billion rupees ($48.50 million) so far.

Eros’ Mumbai-listed shares ended down 19.11 percent on Monday, under-performing a 0.4 per cent fall in the broader NSE index.

Sampath Reddy, chief investment officer, Bajaj Allianz Life Insurance.

Demand slowdown, poor monsoons, weak global commodity prices (metals in particular) are the key worries for the Indian economy, Sampath Reddy, chief investment officer, Bajaj Allianz Life Insurance told Financial Express online. He further said that infrastructure sector stands to be the biggest beneficiary of the interest rate cut as most infra-projects typically have higher leverage. Here are the excerpts from the interview:

Q. How do you see a 50 basis points rate cut by the Reserve Bank of India in September and how it will impact banking sector?
A. 50 basis point rate cut was a pleasant surprise and the dovish tone of the policy statement suggests that the monetary easing cycle is not over as yet. This should help in overall reduction in the interest rates in the system. The focus of the policy is now clearly shifted towards kick-starting the economic growth. Banks have already taken steps towards passing on the repo rate cut through reduction in base rate. Lenders would benefit on declining interest rates with respect to their mark-to-market on treasury holdings. But, we do not expect material improvement in margins on sustainable basis on account of cut in repo rate. The more positive impact on the banks is through indirect i.e. through improved credit growth, better demand for credit and reduced risk of NPAs ( Non performing Assets).

Q. How do you see infrastructure sector after the rate cut?
A. Infrastructure sector stands to be the biggest beneficiary of the interest rate cut as most infra-projects typically have higher leverage. However, high interest rates do not represent a meaningful portion of the trouble for the infrastructure sector as a whole. The key issues with some of the troubled infra projects are either on account of availability of raw materials, land or supply price contracts which have to be addressed.

Q. Can we expect a further rate cuts in the ongoing financial year?
A. Yes, I expect a further 25-50 basis points cut going ahead as the RBI is more comfortable on inflationary expectations going ahead. Also, globally most central banks continue with their easy monetary policy hence there are not many risks for us to lower rates further.

Q. How do you see domestic equity markets at present? Where do you see Sensex and Nifty by March 2016?
A. We do not expect a huge upside going ahead over the next 6 months as corporate earnings growth continues to be weak near term. However, with overall reduction in the interest rates, and policy measures taken by the new government should help in corporate earnings growth recovery towards 1HFY17; Hence, very near term, market may not give much upside from current level, but for three years one could expect about 12-15 per cent annual returns.

Q. What are the key concerns facing the economy? Are global issues also having an adverse impact?A. Demand slowdown, poor monsoons, weak global commodity prices (metals in particular) are the key worries. US Fed’s monetary tightening, imploding China and the health of the oil exporting emerging countries are the key global worries.

Q. Do you see a lackluster market for some time or will there be some renewed interest after the recent fall?
A. Clearly the institutional investors (FIIs) are facing redemption pressures and their selling was absorbed by the domestic institutional investors (DIIs). A fresh bout of selling by FIIs can really dampen the sentiments. Also the supply of paper from the Government of India (GOI) as a part of the divestment programme can take out liquidity from the markets. So the markets are likely to be in a range bound till the time the earnings growth really picks up.

Q. What is your take on FII activity that we have seen so far? In the first FIIs half of the ongoing financial year net outlows by FII were over 14,000 crore, how do you see the second half? Do you think this outflow will continue?
A. In the first half, we saw close to $2.4 billion worth of net sell by the FIIs and DIIs who bought a net of Rs 59,000 crore during the same period. Not sure FIIs would continue to sell, the critical part will be whether DIIs are able to match it with their inflows.

InterGlobe Aviation has fixed the price band for its initial share sale at Rs 700-765, through which it could raise up to a little over Rs 3,000 crore. (Photo: AP)

InterGlobe Aviation, which runs IndiGo, is set to hit primary markets with its public offer or initial public offering (IPO) on Tuesday (October 27). The company has fixed the price band for its initial share sale at Rs 700-765, through which it could raise up to a little over Rs 3,000 crore.

According to InterGlobe Aviation it will retire nearly one-third of its total debt of Rs 3,912 crore from the share-sale proceeds. The issue will close on October 29 (Thursday).

IndiGo is one of the two profit-making domestic airlines with the other one being GoAir. At present, only two domestic scheduled carriers – Jet Airways and SpiceJet – are listed, while trading in long-grounded Kingfisher Airlines has been suspended for a long time. For the financial year ended March 2015, InterGlobe Aviation reported net profit of Rs 1,295.58 crore up 173 per cent, against Rs 474.44 crore in the previous financial year. The company registered net profit of Rs 987.3 crore in the financial year ended March 2013.

Market experts and the management of Interglobe aviation is looking bullish on the Interglobe Aviation IPO. Aditya Ghosh, president, whole-time director, Indigo Airlines, told Financial Express online, “Investors should subscribe to the IPO because we are the most profitable airline in the fastest growing aviation market in India. We have also got a competitive advantage which no one can replicate for the next five years. With 33.9 per cent market share, we are also the largest domestic career.”

According to Angel Broking, Interglobe Aviation has been the only passenger aircraft operator in India to post consistent profits over the past seven years. The magnitude of the aircraft orders placed by the company has enabled it to negotiate favorable terms with Airbus, as well as with other suppliers and service providers. This has created a structural cost advantage for the company in terms of operations and maintenance of aircrafts compared to its peers. The brokerage house believes that the valuation of Interglobe is justified, considering the opportunity present in the vastly underpenetrated Indian air travel market. Interglobe is better placed than its peers to capture higher market share on the back of its proven management track record, continuous fleet addition and with its sustainable profitable business model. Hence Angel Broking recommends a “Subscribe” to the issue at the higher end of the price band.

Total revenue of the company grew 25.16 per cent year-on-year to Rs 14,309.14 crore in FY 15 against Rs 11,432.12 crore last year.

The global coordinators and book running lead managers to the issue are Citigroup Global Markets India Private Ltd, JP Morgan India Pvt Ltd and Morgan Stanley India Company Pvt Ltd. The book running lead managers are Barclays Bank PLC, Kotak Mahindra Capital Company and UBS Securities India Pvt Ltd.

The offer comprises fresh issue of shares worth Rs 1,272.2 crore and the revised Offer for Sale (OFS) size that would be about Rs 1,746 crore. Together, the share sale can rake in up to Rs 3,018.2 crore.

With three promoters — Rakesh Gangwal, Shobha Gangwal and Chinkerpoo Family Trust — deciding to offload less number of shares in the company, the IPO size has come down to Rs 3,018 crore.

On the basis of earlier proposal, the initial share sale could have fetched up to Rs 3,268 crore. These figures are based on the upper price band of Rs 765 apiece.

With agency inputs

Force Motors posted net profit of Rs 42.48 crore for the quarter ended September 30, 2015 against Rs 25.69 crore in the corresponding quarter a year ago. (Photo: PTI)

Force Motors shares gained as much as 7.5 per cent on Monday after the company on Saturday registered 65 per cent rise in bottomline figures for the second quarter ended September 30, 2015.

For the quarter ended September 30, 2015, the company posted net profit of Rs 42.48 crore against Rs 25.69 crore in the corresponding quarter a year ago.

At 12.48 pm, Force Motors was trading 4.70 per cent up at Rs 3,640 on BSE. The scrip opened at Rs 3650 and had touched a high and low of Rs 3,739 and Rs 3,576.50, respectively, in trade so far.

Net sales of the company rose to Rs 755.97 crore, up 27.62 per cent, against Rs 592.37 crore during the same period last year, Force Motors had said in a regulatory filing.

Force Motors is a fully vertically integrated automobile company, with expertise in design, development and manufacture of the full spectrum of automotive components, aggregates and vehicles.The company’s product range includes tractors, three wheelers, light commercial vehicles, multi utility vehicles and heavy commercial vehicles.