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Exclusive: India’s Sahara uses small savers to keep hill resort afloat

MUMBAI Embattled Sahara conglomerate has been funnelling cash from small savers to fund one of its biggest projects, a luxury resort south of Mumbai, according to documents Reuters reviewed.

Sahara has ploughed at least 15 billion rupees ($221 million) from two of its credit cooperatives into the Aamby Valley resort project through investments in preference shares, according to documents filed with the companies regulator.

  It is doing so as some investors in its credit cooperatives complain they have struggled to get Sahara to pay out their matured time deposits – even for sums as low as 30,000 rupees ($448.83).

    The credit cooperatives investments into Aamby Valley are not illegal. Cooperatives are allowed  to invest in shares and bonds of infrastructure and real estate companies after board approval, if they are in the interest of the cooperatives, according to the law under which these cooperatives operate.

Responding to Reuters queries, a spokesman for Sahara Credit Cooperative Society Ltd. said in an emailed statement that “all required approvals” were in place and the investments would not put investors at risk. He did not elaborate.

Sahara Credit Cooperative had shares worth 10.39 billion rupees in Aamby Valley, according to Aamby Valley’s 2014 annual report.

Saharayn E-Multipurpose Society Ltd, which had shares worth 4.6 billion rupees in the resort, did not respond to requests for comment.



But some experts say if Sahara is using deposits from the cooperative societies to finance Aamby Valley, members of the cooperatives might face difficulty recouping their money. That’s because the conglomerate is under pressure to sell of some of its prized assets to pay off investors in a savings deposit scheme the Supreme Court has declared illegal.

  The two credit cooperatives could be hit “if Aamby Valley is monetised and the proceeds are given up to the investors of the earlier financial schemes, which is sitting in the Supreme Court,” said Prem Rajani, founding partner of Mumbai-based law firm Rajani Associates, which works in the areas of banking and finance, and corporate litigation.

The Supreme Court will decide next Tuesday whether to appoint a receiver to auction off some of Sahara’s properties as part of efforts to refund investors in the banned savings deposit scheme.

A senior official from the Ministry of Agriculture’s credit cooperatives division, which regulates the cooperative societies that operate across state lines, said Sahara could be “misusing provisions of the law” that govern credit cooperatives by investing some of the cooperative funds into Aamby Valley.

The official said cooperative funds should not invested in a struggling company or project, or be used for any risky investment, the official said, declining to be named as the person was not authorised to speak to the media.

The division will look into the matter if they receive any complaint on this, the official said.


    Over the past four decades, Sahara founder Subrata Roy used his series of small deposit plans to build Sahara into an empire that encompasses businesses ranging from New York’s Plaza hotel and London’s Grosvenor House, to television stations, property project’s and a stake in a Formula One racing team.

    But Sahara has been struggling financially since the Supreme Court ordered the conglomerate in 2014 to repay investors in a 2008-11 Sahara time deposit plan that it declared was illegal.

Roy has been in jail for the past 22 months for not complying with the Court’s order to return 360 billion rupees ($5.4 billion) to investors.

Credit cooperatives are widely used by the rural poor. A lack of banking services in India – nearly two-fifths of its 1.27 billion people have no bank accounts – has helped shadow banks such as the credit cooperatives thrive for decades.

    Reuters has spoken to dozens of savers who said Sahara had not given them their money when their deposits matured. Instead, they complained, Sahara’s agents and branch officials tried to persuade them to switch their matured savings deposits into new schemes offered through credit cooperatives run by Sahara.

    In the emailed response to Reuters, Sahara said it was not aware of this practice.


    Spread over 4,000 hectares (10,000 acres) in the hills of Maharashtra, Aamby Valley bills itself as India’s first planned city since independence: a sprawling resort of luxury chalets, manmade lakes and an airport, favoured by the business elite and Bollywood stars.

    Sahara said in a statement to Reuters the Aamby Valley project was valued at about 1 trillion rupees ($14.76 billion), citing a 2014 report of property consultant Knight Frank’s India unit.

Markets regulator the Securities and Exchange Board of India (SEBI), which had asked the Supreme Court to order Sahara to repay millions of investors in its 2008-11 time deposit plan, has pegged the valuation of lands owned by Aamby Valley and its units at about 405 billion rupees ($5.95 billion).

The high valuation claim of Sahara contrasts with the flagging financial profile of the project: Aamby Valley posted an after-tax profit of 90 million rupees in the 12 months ended March 2013 compared to 694 million in the July 2011-March 2012 period, according to the latest figures from the regulator of companies in India.

($1 = 67.9175 rupees)

(Reporting by Sumeet Chatterjee. Editing by Bill Tarrant.)

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Berkshire resumes buying Phillips 66 stock

Berkshire Hathaway Inc (BRKa.N), the conglomerate run by Warren Buffett, has resumed its purchases of Phillips 66 (PSX.N) stock, and spent roughly $832 million in January to boost its stake even as the oil refiner’s profit margins narrowed.

According to a regulatory filing on Friday night, Berkshire paid about $198 million this week for 2.54 million Phillips 66 shares, its first purchases of the stock since Jan. 14.

For all of January, Berkshire bought 10.81 million shares, giving it 72.29 million overall, or a roughly 13.7 percent stake in Houston-based Phillips 66. Those shares were worth $5.79 billion as of Friday’s market close at $80.15.

Phillips 66 is Berkshire’s sixth-largest stock holding, regulatory filings show.

On Friday, Phillips 66 said quarterly net income fell 43 percent from a year earlier to $650 million, or $1.20 per share.

The decline resulted in part from lower crack spreads, or the difference between the cost of oil and the price of refined products, and asset writedowns resulting from low commodity prices.

Excluding items, Phillips 66 reported profit of $1.31 per share, topping analyst forecasts.

Berkshire previously invested in ConocoPhillips (COP.N), which spun off Phillips 66 in 2012.

In February 2014, Berkshire swapped much of its Phillips 66 stock back to the company for a chemicals business. It began rebuilding the stake early last year.

Berkshire announced the new Phillips 66 purchases a few hours after the Omaha, Nebraska-based company completed its largest acquisition, a roughly $31.7 billion purchase of industrial components maker Precision Castparts Corp.

Buffett has said Berkshire would spend about $23 billion of cash on that acquisition, and finance the rest.

(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)

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Nokia-Samsung patent verdict expected within days

HELSINKI Nokia (NOKIA.HE) and Samsung (005930.KS) are expected to settle their two-year patent dispute within days, with analysts forecasting a one-time payment of hundreds of millions of euros for the Finnish company.

Nokia entered into a binding arbitration with South Korea’s Samsung in 2013 to settle additional compensations for a five-year period starting from early 2014.

The International Chamber of Commerce’s arbitration court is due to make its ruling on the issue imminently.

Nordea analyst Sami Sarkamies, one of few analysts to give a precise estimate, said the verdict could boost Nokia’s operating profit by about 700 million euros ($758 mln) this year, forecasting the court will stipulate an annual patent fee of 300 million euros.

“Samsung has been paying Nokia probably 100 million per year, and the rate could now come up to around 300 million euros (per year). The settled rate will also be paid retrospectively for the last two years,” Sarkamies said.

“But they have already booked perhaps 100 million a year from Samsung to their income statement, so the EBIT impact for this year could be around 700 million euros.”

Sarkamies has a “hold” rating on Nokia shares, which have fallen 9 percent since last April when it announced a 15.6 billion euro takeover of French network gear rival Alcatel-Lucent (ALUA.PA), due to be completed this quarter.

Investors have worried about the integration process and special terms negotiated by the French government, but the share price could get a boost if the settlement with Samsung is much bigger than analysts forecasts.

Last month, Sweden’s Ericsson (ERICb.ST) said that a patent license deal with Apple Inc (AAPL.O) would help lift its intellectual property rights revenue by up to 40 percent in 2015, sending its shares up sharply.

Nokia, which once dominated the global mobile phones market, is now focused on telecom network equipment but still holds on to a portfolio of phone patents.

It said last month that the International Chamber of Commerce had advised that the settlement with Samsung is expected by the end of January.

A Nokia spokesman declined to comment on Saturday, saying the company had nothing to add beyond the previous statement.

($1 = 0.9233 euros)

(Reporting by Jussi Rosendahl; Editing by Susan Fenton)

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Toyota may halt Japan car output in February due to steel shortage

TOKYO Toyota Motor Corp said on Saturday it may halt production at its domestic plants early next month due to a steel shortage, following an explosion at a steel plant operated by one of its affiliates.

The blast an Aichi Steel plant has curbed production of steel parts, which may impact output at the world’s best-selling automaker which produces around 40 percent of its global output in Japan.

“At the moment, there is enough supply inventory to keep our domestic plants running until Feb. 6,” a Toyota spokesman said, adding that overtime and weekend shifts for next week had been canceled.

“After that, we will be monitoring our supply situation on a day-by-day basis and decide accordingly.”

Aichi Steel said that the Jan. 8 explosion at its Chita plant in central Japan dented production of special steel parts. It added that it aimed to resume operations in March.

Toyota, whose vehicle stable includes the Toyota and Lexus brands, as well as Daihatsu Motor Co minivehicles and Hino Motors trucks, produced 4.0 million vehicles in Japan in 2015, roughly 46 percent of which were exported.

A stoppage in production may impact Toyota’s plans to produce 4.13 million vehicles in the country this year, including its new Prius gasoline hybrid, which was launched in the United States this month and is produced solely in Japan.

Toyota plans to build 10.2 million vehicles worldwide this year, after posting worldwide sales of 10.15 million in 2015, beating out Volkswagen and other automakers to keep its title as the world’s largest-selling carmaker.

Toyota, which manufactures around 14,000 vehicles a day in Japan, would not comment on which components were supplied by steel made at the affected plant.

(Reporting by Osamu Tsukimori and Naomi Tajitsu; Editing by Nick Macfie)

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U.S. corporations to report best and worst of times

NEW YORK Stock market investors who spent January swayed by oil prices, economic weakness in China and central bank speculation may continue to do that next week, even though it should be a dramatic one for earnings reports and economic data.

Fourth-quarter 2015 earnings reports coming from Internet leader Alphabet (GOOGL.O) and Exxon Mobil (XOM.N), an old-economy company hit by falling oil prices, will spotlight the yin and yang of Corporate America.

If shares of Alphabet, Google’s parent, rally in response to the strong results that are expected, it could displace Apple (AAPL.O) as the biggest company in the world. That would be ironic and a confirmation of the move away from traditional companies to new tech ones: Apple unseated Exxon when it climbed to the top of the list in 2011.

So far, the earnings reporting season has painted a bifurcated picture of corporate health: social media behemoth Facebook (FB.O) reported fourth-quarter revenues more than 50 percent higher than those of the same quarter a year earlier, while oil major Chevron (CVX.N) reported its first quarterly loss in more than 13 years.

As they have for several years running, companies are generally beating expectations on earnings but doing so via cost cuts and buybacks; the number of companies surprising analysts with better-than-expected sales figures is far smaller.

Perhaps because of that, investors have muted their response to earnings reports a bit while they ramp up trades based on more global events, such as Chinese economic reports or oil price declines and increases.

Though investors continue to bid up stocks of companies that beat expectations and sell those that fail, the spread between their performance has narrowed, said Jonathan Golub, chief equity strategist at RBC Capital Markets in New York.


Alphabet reports earnings Monday. Its stock has moved on average 5.5 percent (sometimes up, sometimes down) following its previous eight quarterly results. With a market capitalization near $517 billion, such a move higher would catapult it over Apple’s $536 billion.

The company’s numbers are expected to shine.

“For the past two quarters Alphabet has delivered strong results beating analysts’ estimates,” said Peter Garnry, head of equity strategy at Saxo Bank in Copenhagen. “Facebook’s blowout fourth-quarter results point to strong mobile and video numbers for Google.”

Other companies reporting earnings next week include Aetna (AET.N), Pfizer PFE., Merck (MRK.N), Anadarko (APC.N), ConocoPhillips (COP.N), Occidental Petroleum (OXY.N) and General Motors (GM.N).

On the economic front, the all-important U.S. employment report expected Friday will close a week that includes key data on factory activity and construction spending, car sales, services sector growth and inflation.

The numbers come after data showed U.S. economic growth slowed sharply in the fourth quarter with gross domestic product up at a 0.7 percent annual rate.

“Manufacturing is clearly weak, segments of manufacturing are in a recession, so the one thing that continues to keep our head above water on a GDP basis is the consumer,” said Don Ellenberger, head of multi-sector strategies at Federated Investors in Pittsburgh.

“Any sense of weakness in the payroll number or any of the employment statistics we get next week would really be a cause for concern.”

(Reporting by Rodrigo Campos; Editing by Linda Stern and James Dalgleish)

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Boeing wins contract to build new Air Force One presidential jets

WASHINGTON Boeing Co (BA.N) has won a contract to start preliminary work on a new fleet of Air Force One presidential aircraft based on its 747-8 jumbo jet, the Pentagon said on Friday.

The U.S. Air Force awarded Boeing an initial contract worth $25.8 million to reduce risk and lower the cost of the program by looking at the tradeoffs between the requirements and design of the new plane, according to the Pentagon’s daily digest of arms deals.

Details about the total value of the new contract have not been released, but the Air Force has previously said that it had earmarked $1.65 billion for two replacement jets.

The Air Force first announced in January 2015 that Boeing’s 747-8 would be used to replace the two current Air Force planes used to transport the U.S. president. Air Force One is one of the most visible symbols of the United States.

The Air Force plans to modify the contract in coming years as the Air Force One program moves into the engineering and design phase, and later, into production.

The Air Force now operates two VC-25s, specially configured Boeing 747-200Bs, which are nearing the end of their planned 30-year life.

In January, Air Force Secretary Deborah James said the Air Force One program would use proven technologies and commercially certified equipment to keep the program affordable.

The Air Force decision was widely expected since the only other suitable four-engine jet is the A380 built by Airbus (AIR.PA) in Toulouse, France.

The 747-8 is the only four-engine commercial jet Boeing makes, providing an extra margin of flight safety over the more standard twin-engine planes.

Boeing last week said it would cut production of the 747-8 in half in September and take a $569 million charge in the fourth quarter as it faces dwindling sales.

The four-engine jet is now mostly a cargo workhorse, eclipsed by more fuel-efficient twin-engine jets for passengers.

The double-decker plane entered service in 1970, undergoing a major overhaul in 2012, with new engines and a longer fuselage.

(Reporting by Andrea Shalal; Editing by Diane Craft)

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Fed’s Williams says sees ‘smidgen’ slower rate hikes

SAN FRANCISCO The Federal Reserve probably needs to keep U.S. interest rates lower for longer given headwinds from weak global economic growth, a stronger dollar and an unexpectedly sustained drop in oil prices, a top Fed official suggested on Friday.

San Francisco Federal Reserve Bank President John Williams told reporters he now sees slightly slower growth, slightly higher unemployment, and about a tenth of a percent lower inflation this year than he had expected in December, when the Fed raised rates for the first time in nearly a decade.

At the time, officials at the Fed, the U.S. central bank, had as a group expected about four further rate hikes this year, and Williams had said that was in line with his own expectation.

That view appears to have changed, after investor worries about a global slowdown and weakness in China sent equities and oil prices plunging through most of January. Meanwhile the dollar has strengthened, pushing down on U.S. inflation, which is running well below the Fed’s 2-percent target.

“Standard monetary policy strategy says a little less inflation, maybe a little less growth … argue for just a smidgen slower process of normalizing rates,” Williams said.

“We got a little stronger dollar, some mixed data on the economy, some weakness in (fourth-quarter U.S. GDP growth), all of those coming together kind of tell me that we probably need a little bit more monetary accommodation this year than I was thinking in the middle of December.”

Earlier this week Williams was in Washington, where he and other Fed policymakers decided to leave benchmark rates unchanged and to acknowledge that they were closely watching global financial markets.

Williams said that over the past several months nothing had fundamentally changed in his view of China’s growth path, and that even the Bank of Japan’s surprise move to negative interest rates on Friday had not changed his baseline forecast for the U.S. economy.

Further, his scenario of what’s most likely for the U.S. economy, his “modal” forecast, remains fundamentally unchanged for 2016 and 2017, he said.

He has previously forecast the U.S. economy will grow at about 2 percent to 2.25 percent, inflation will begin to return to the Fed’s 2-percent target over the next couple of years, and the unemployment rate, now at 5 percent, will also fall.

“The thing that has changed is that commodity prices keep coming down,” he said.

(Reporting by Ann Saphir; Editing by James Dalgleish)

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Fed is clearly on a path of returning rates to normal: Williams

SAN FRANCISCO The Federal Reserve is clearly on a path of returning interest rates to a normal level of 3 percent to 3.5 percent over the next few years, a top Federal Reserve official said on Friday.

Raising rates in December was the right thing to do, given the improvement in the labor market, San Francisco Federal Reserve Bank President John Williams said. Further and gradual rate increases “make sense” he said, although the exact timing of rate hikes will depend on the economic data.

U.S. domestic demand is strong, he said, and is offsetting weakness in exports and manufacturing that is an effect of weak growth abroad, particularly in China.

(Reporting by Ann Saphir; Editing by Meredith Mazzilli)

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Oil rises, pares losses in January on hopes for production deal

NEW YORK Oil prices rose on Friday, rebounding more than 25 percent from 12-year lows hit last week and cutting losses for the month, on prospects of a deal between major exporters to cut production and curb one of the biggest supply gluts in history.

Oil also drew support from firmer stock markets, lifted by weak U.S. gross domestic product growth data that raised hopes the Federal Reserve may slow any planned interest rate hikes.

The oil market rallied for four straight sessions after a renewed call from the Organization of the Petroleum Exporting Countries for joint efforts with rival producers to cut supply triggered a volley of comments from Russia on a deal with the cartel, something it had been refusing to do for 15 years.

Brent March futures LCOc1, which expired on Friday, closed at $34.74 a barrel, 85 cents or 2.5 percent higher. On Jan. 20, it hit $27.10, its lowest since November 2003.

U.S. crude CLc1 settled up 40 cents or 1.2 percent, at$33.62 per barrel, having hit a high of $34.40 in the session.

For the week, Brent was 7.9 percent higher and U.S. crude 4.4 percent higher, paring their monthly losses to 6.8 percent and 9.3 percent respectively.

Both contracts briefly turned negative after the Wall Street Journal cited an Iranian oil official as saying the country would not join an immediate OPEC production cut.

Moscow has sent mixed signals, eventually saying veteran minister Sergei Lavrov, who almost never comments on oil policies, would visit the UAE and Oman to discuss oil markets.

Cash-strapped Venezuela is also sending its oil minister to Russia on a tour beginning on Saturday of non-OPEC and fellow OPEC states.

“The market has rewarded these statements about the possibility of a deal, even though I think it’s ridiculous,” said John Kilduff, partner at Again Capital LLC in New York.

He noted that Iran and Iraq were determined to boost production, and were unlikely to come together with Saudi Arabia to cut OPEC output. The Saudis have made no official statement on a deal.

“This is a rally on false hopes, unfortunately”

Other analysts said prices may have found a bottom and could rally as high as $45 by year-end as non-OPEC supply is reduced and global demand improves.

U.S. oil production fell in November for the second straight month and U.S. shale producers, who have helped add to the glut, have slashed 2016 capital spending plans more than expected.

Meanwhile, the U.S. oil drilling rig count fell for the sixth straight week with more cuts seen, oil services company Baker Hughes Inc (BHI.N) said.

“With more energy companies announcing cuts and OPEC contemplating a cut, it looks like oil is forming a bottom,” said Phil Flynn, an analyst at Price Futures Group in Chicago.

“Now the question becomes how high can they go. The charts look like a test near $40 is on the cards.”

In a sign that the market sentiment was improving, hedge funds raised their bullish bets on U.S. crude oil for the second straight week, the U.S. Commodity Futures Trading Commission (CFTC) said.

“It’s something that sub-$30 oil does. It makes some traders inclined to think that we are have reached or are near a bottom, so they want to be positioned ahead of it,” said Gene McGillian, Senior Analyst at Tradition Energy in Stamford Connecticut.

(Additional reporting Simon Falush and Dmitry Zhdannikov in London, Meeyoung Cho in Seoul and Henning Gloystein in Singapore; Editing by Marguerita Choy and David Gregorio)

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