Yahoo continues its acquisition spree – a bid for Hulu this time!

Yahoo continues its acquisition spree – this time it has bid for

Hulu brings along a lot of content along with demographic data to complement the Tumblr acquisition. Yahoo competes with media giants and private equity firms for this bid! The ‘range’ of the bid indicates its desperation – clearly it does not want to repeat the Youtube bidding scenario.

It might seem like Yahoo is trying to fill the Youtube gap in its portfolio, Hulu has its differences when compared to Youtube. Hopefully Yahoo doesn’t try to replicate Google’s Youtube strategy with Hulu – it deserves a integration & monetizing strategy of its own.

Some more details at Business Review Weekly & Silicon Angle

Bank Guarantee to finance the student loan @ HEC

Well this blog has become more of a place for me to scribble, than to practice and improve writing skills 😦

Nevertheless, the next September intake is due to arrive at HEC in a few months! I am sure they would have several questions on their mind! So after Satyendra messaged me with one such question, I quickly got onto this post (especially since not many have dealt with this aspect and I had been thinking of writing this for the past three months. Thanks Satyendra for the nudge)

Intended Audience: Candidates from India who want to take a student loan from France.

Others, read on if you find any similarities with the system in your country, else feel free to drop out mid-way.

Disclaimer: I did attempt this thing. Got the guarantee issued from India. But, finally backed as by the time I learnt all the aspects of this, I ran out of steam and time!!

Why take the student loan from a French Bank (say BNP Paribas)?

  • They offer a rate of only 3% as opposed to the likes of 14% APR in India!
  • A maximum tenure of 10 years with a maximum moratorium period of 3 years, as opposed to a maximum tenure of 7 years in India

What does BNP Paribas (Jouy-en-Josas) need to process this?

  1. A guarantee from a French resident that you won’t run away. And if you do, the guarantor will pay up! OR
  2. A guarantee from a Bank in India that will pay up(again) if you run away and default on your payments to BNP. If the loan is intended for 5 years, the guarantee should  be for 5 years (not lesser) [Edit: June 28, 2012: The guarantee is sent as a SWIFT message and has a format defined by BNP Paribas. You need to get in touch with BNP Paribas, France and procure the sample format to be forwarded to the Bank in India. Check the HEC website financing section for contacts details]

Beware: The process moves very slowly in Jouy. Especially since the BNP branch we deal with is in Jouy-en-Josas (which is quite small) while the international Bank guarantee (BG) is received at a head office somewhere in Paris. Yes you should be prepared to know that email travels slower than snail-mail!

I have no clue how option 1 works! I have tried option 2, and that’s what I will elaborate on

Which Banks in India can help you ? What is the product?

What do you need to ask the bank for?  An “International bank guarantee”

Stressing on the ‘International’ is essential as it changes the rules of the game. Be prepared, you would be surprised to know that barely any managers know the concept of “International Bank Guarantee”

Which banks in India do this? I tried this with: ICICI, HDFC Bank, SBI, Indian Bank, Bank of India etc etc. I got positive responses from SBI, ICICI, HDFC Bank. Chances improve if this is done in major cities (I would make that Metros + Bangalore + Hyderabad)

What do the Indian Banks ask in return?

To issue the International BG they would need collateral in either of two forms below:

  1. In full cash (in the form of Fixed Deposits)!! They must be crazy! But it is what it is!
  2. In cash + property (Almost impossible to get because of the “International” thing)

Now the math! (Put in your own numbers, this is just an example)

  • Desired Loan Amount: 30000 Euros
  • Exchange Rate: INR 70/-
  • Equivalent Guarantee Amount in INR: 21 Lakhs
  • Duration of BG: (say) 10 years
  • Collateral: Banks usually ask for at-least 110% collateral cash collateral. Say 120% here.

Caveat 1: The wonderful trend between the Euro and INR has screwed this up, and banks now ask for higher % collateral to cover their risk. (I had negotiated a 120% when banks said 130%)

Caveat 2: The first caveat also makes banks say, that they need higher collateral % since the BG is locked for several years, and they wouldn’t know which direction the Euro would move! To this, I would say: “Lock my FD for those many years, and let the interest accumulate”, in case of an unfavorable movement, your risk is covered to some extent”.

Ok now, the costs!

The Commissions / Fees

  • Banks usually charge about 2 to 3% per annum of the amount of guarantee.
  • At 2%, here, the fee would be (2% of 21 Lakhs) x 10 (the no. of years) = 4.2Lakhs
  • SBI charges 1/4th the commission % if collateral is full cash. So let’s make this 1.05L

Caveat 3: Ask the bank to issue the BG for shorter duration (say 1 yr or 18 months) on a renewable basis. The approval process for shorter duration BG is a lot simpler and moves faster as against a 10 year BG request. Advantage of doing that, upfront collateral % can be negotiated downward, but subject to annual revision depending on exchange rate. Also, the upfront fee maybe locked up as an FD and the bank can be told to break this up each period to get their commission and re-issue the BG.

So BNP Paris still gets an annual BG with a commitment to renew the BG for 10 years. You earn interest on the 4.2L as an extra bonus.

Total Money to be put in the FD: (21 x 1.2) + 1.05L = 26.25L!

If I had this money, why don’t I pay the school right away?

Well that’s your choice, but here’s the spicy twist to the tale:

This 26.25Lakh fetches you an interest ~ 9% p.a (as of June) in India in a fixed deposit instrument. You pay the commission at 0.5% and an interest to BNP of 3%. Net you earn 5.5% on this huge amount. (Keep in mind taxes and TDS to fine tune).

In my opinion, it is a good option to use, but bear in mind the RISK: Exchange Rate! It has played a big spoil sport in the recent past. So do the math right and if you have additional resources to put in in case the exchange rate becomes more unfavorable.

Why didn’t I do it eventually?

I had paid the commission for only one year, and BNP refused to accept that guarantee for the loan of 7 years. By the end of it, I had run out of energy to do this. I was working with SBI (Indiranagar, Bangalore). And yes, set your expectations straight, SBI is faster than BNP is!

Have others done it before? Yes there are people who have done this!

Now, it is clearly your call!

Please do share with others if you manage to pull-it-off! In fact, try pooling in multiple candidates together in the same city, gives you more bargaining power with the bank!

All the best!

How much is enough ?

This is a question I’ve seeked an answer to from multiple sources. To clarify the question itself first, I’m referring to the cash requirement stated by French consulate authorities for the student visa processing to go smoothly.

(Again, this stems from my ongoing process of applying for a student visa for studying at HEC, Paris)

So firstly, how much is enough ?

There are two parts to this. First the student is travelling alone (the majority case) and second is where the student is moving alongwith a dependent partner.

You need to show funds for
1. Tuition Fees
2. Living expenditures (Self)
3. Living expenditures (Dependents if they are travelling with you)

For a student travelling alone the amount deemed required for the living expenditure of self is set at is 537 Euros/month for the duration of the course. (12 months in case of the HEC MBA, as four months are supposed to be paid internship)

If you are travelling with dependents (in my case I will be accompanied by my wife and 2 year old daughter), the above requirement is void. Instead, what I’ve been told is “You have to justify that you can provide for your family in France, you should at least meet the amount of 1 070,76 €/months which is the amout of the minimum wage determined for 2011”

Now the next aspect, what are the acceptable forms of proof of funds ?

Essentially anything with liquidity is acceptable.

  • Several candidates may apply for loan for part or entire amount. A sanction letter from the financial institution stating the amount provided as loan will act as one financial proof.
  • Savings Bank Balance: This is by far the best possible proof of source of funds. High liquidity makes this as the most preferred ( I do not know of any requirement of holding certain amount of cash for a pre-set period)
  • Fixed Deposits: Yet another easily accessible liquid source of funds.
  • PF: Some (like me) would intend to withdraw the hard earned provident fund. Well a PF statement showing the balance in your PF should suffice. This is usually not up to date when it is a government PF; I intend to furnish a letter from my company stating the current estimated PF balance. (will update this info once I’ve processed my visa docs).
  • PPF: PPF passbook statements should also be a good source to indicate source of funds.
  • Any other liquid assets like Equity/MF investments should also suffice…

In the case where we show funds from anyone-but-self, we need to furnish a plain paper declaration from the person, stating that he/she will be sponsoring our education and we must provide the essential documentary evidence supporting it.

That’s it. This was a good revision for me, before I prepare for my visa interview. Hoping this proves useful to others seeking info.