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re: help 4 corporate finance project
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Account Manager - BD at UPS Supply Chain Solution India Pvt Ltd
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re: help 4 corporate finance project - September 22nd, 2007

Investment in Rajasthan
India is sometimes referred to as the nation of shopkeepers. This is because the country has the highest density of retail outlets- over 15 million- in the world. But out of this about 98% of the retail trade is in the organized sector.
In Rajasthan, FDI is encourages in the retail sector and now the organized retail sector is on its boom in the cities. It is a new concept n is on the hub in the urban Rajasthan. FDI is prevalent in the retail sector of handicraft industry, gold council and marble industry.
Aerens Gold Souk, Gold Souk, a jewellery mart, will soon come up in Jaipur. The mart will have the facility of selling jewelleries from across the world under one roof. The Jaipur Development Authority (JDA) has handed over 10,000 to Aerens Gold Souk International near Jawahar Circle at the rate of Rs 25,000 per to construct the mart. The mall will offer facilities and services such as valet parking for more than 600 cars, a food court, a bank, an ATM, currency exchange counters, a children's play area, a florist, a beauty salon, a business centre, conference rooms, executive lounge, a designer's gallery, a fashion resource library, and an exhibition area.
With the growth in the organized retailing and vertical integration of the distribution chain, retailers are now playing a crucial role in designing and branding new products, which would match consumer preferences. Consequently, manufacturers are losing their predominant position and have to gear their products to meet the specific demand of the retailers. In-house brands of many retailers such as pantaloons and shoppers’ stop are price competitive and offer significant competition to manufacturers. In order to increase efficiency in the supply chain, retailers are investing in supply chain management technologies and are sourcing products directly from the manufacturers, bypassing the wholesalers and middlemen.
For e.g. Shoppers’ Stop has bought over Crossroads while Viveks has taken over Jainsons. In cities where organized retailing is growing at a fast pace, unorganized retailers are reinvesting their personal savings and consolidating their position to form standalone supermarkets. The small retailers are also becoming more organized in terms of merchandise sourcing and accounting.

Handicraft Industry
The Federation of Rajasthan Handicraft Exporters is conceptualized to be interface between the Handicraft Exporter, the Government and other related institutions in order, that the industry may grow and progress in totality.

The economic importance of the handicraft sector lies in their high employment potential, low capital investment, high value addition & high demand in domestic & overseas markets. Jaipur is one of the most important areas not just in Rajasthan, but also in the country for the production & subsequent export of handicrafts. The Indian handicrafts are known for its ethnicity and elegancy.

It is very strongly felt that handicraft in Rajasthan could be a sunshine & key industry in the non – farm sector, specially in view of the consistent droughts every 2nd or 3rd year, and would provide large-scale employment & revenue generation for the rural & socio – economically backward classes. It is also majorly a non – polluting industry.

In view of the facts as presented above; following investment opportunities have been identified:
• Job-work processing of imported marble & re-exports
• Stone-craft items - Buy Back agreements and Technology transfer
• Production facilities for consumable: Collaborations, joint ventures,
• Joint venture for mechanised quarrying
• Production of machinery: Collaborations, joint ventures, technology transfers
• International marketing tie-ups for purchase of stones from Rajasthan

Bank of Rajasthan Ltd. (BANRAJ)

Bank of Rajasthan is likely to witness exponential growth in its profitability driven by increase its advances portfolio and higher fee based income. Reduction in NPA levels & recovery from written off assets would provide further fillip to its bottomline. The bank has already transferred majority of its government securities under Available-For-Sale (AFS) to Held-Till-Maturity (HTM) category, to restrict further losses in treasury portfolio, which has dragging its profits in the past. In addition, acquisitions of bank in the south or stake sale to FIIs or strategic investor are other key potential triggers in the stock. Background Bank of Rajasthan, established in 1943, is one of the leading private sector banks in North India with a stronghold in the state of Rajasthan. The bank is actively engaged in Commercial Banking, Merchant Banking, Auxiliary services, Consumer Banking, Deposit & Money Placement services, Trust & Custodial services, International Banking, Priority Sector Banking, Depository services etc. BOR presently has a network of 420 branches and aims to expand to 650 branches in the next two years. Investment rationale Asset quality has improved considerably BOR has taken considerable efforts to clean up its loan book and has already pruned its Net NPAs to Rs 72.25 crore in FY05. The bank is expected to cut its NPAs to 1.5% by FY06 & zero by FY07 from current 2.5% at the end of FY05. The bank has reduced its gross NPA levels by more than 55% in the past 4 years to Rs 159 crore in FY05 on the back of higher recoveries & progressive writing off sticky assets. Recovering of dues from Rs 1200 written-off accounts and setting up of prudent lending policies are likely to add to its bottom line growth in the coming years. Increased focus on retail and SME lending The bank has been identified retail banking as a major thrust area to drive its future growth. The management is looking at an incremental growth of Rs 1000 crore, each year over the next two years and out of which, around 20-25% is expected to come from retail. It has already introduced a series of retail banking products in the form of housing loan, consumer loan, vehicle loan & retail trade loans at most competitive rates. It is also providing educational loan to students for higher studies in India as well as abroad. In addition, it is also targeting the high-yielding SME segment to expand its margins. Net interest margins (NIMs) to improve BOR is taking adequate steps to improve the proportion of its low cost deposits which fell to 30% in FY04. The composition of low-cost deposits is expected to improve from current 32.7% levels in FY05 to 35% by FY07. The overall cost of deposit declined by 27 basis points to 4.57% as on June 2005. In addition, focus on high-yielding SME segment and retail segment is likely to improve the NIM considerably by 70 basis points to 3.2% by FY07. Strong growth in advances to drive profitability BOR recorded lower than expected 26.1% y-o-y growth in advances to Rs 2896.17 crore in FY05 due to easy liquidity in the banking sector & lower off take from the corporate sector. We expect bank’s advances to jump considerably to Rs 6400 crore by FY07 on the back of the back of increased thrust on retail loans, improved SME lending and a broad pick-up in corporate credit demand. In order to augment its growth, the bank plans to raise upto Rs 1000 crore through American depository receipts (ADRs), global depository receipts (GDRs) or a domestic public issue. The bank’s Credit/Deposit (C/D) ratio is also expected to improve from current 35% level to industry average of 50% by FY07 due to lower growth in deposits as against advances. Fee-based income to drive growth further BOR crossed the Rs 100-crore mark in its stamp franking business within one year of getting the licence from the Maharashtra Government. Marketing of various life and non-life insurance products and distribution of third party products like mutual finds are already undertaken by the company. It has launched a co-branded International VISA debit card and also plans to launch its own credit card during the year. All these initiatives are expected to add to its bottom-line going forward. Acquisition to compliment existing business BOR is contemplating taking over a bank in South India to spread its network in the down south. It has already identified about six banks for the same and a merger with a south based bank would compliment bank’s existing network and would enable it to have a strong pan-India presence.


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