NORWICH, Vt.
WHEN Barbara Landau, an environmental and land-use lawyer in suburban Boston, was shopping for insurance on the energy-efficient home she and her husband were building in the woods just outside of town here, she was routinely asked what sort of furnace the home would have.
“None,” she replied.
Several insurers declined coverage.
“They just didn’t understand what we were trying to do,” Mrs. Landau recalls. “They said the pipes would freeze.”
They won’t. A so-called passive home like the one the Landaus are now building is so purposefully designed and built — from its orientation toward the sun and superthick insulation to its algorithmic design and virtually unbroken air envelope — that it requires minimal heating, even in chilly New England. Contrary to some naysayers’ concerns, the Landaus’ timber-frame home will be neither stuffy nor, at 2,000 square feet, oppressively small.
It has been a good deal more expensive to build, however, than the average home. That might partly explain why the passive-building standard is only now getting off the ground in the United States — despite years of data suggesting that America’s drafty building methods account for as much as 40 percent of its primary energy use, 70 percent of its electricity consumption and nearly 40 percent of its carbon-dioxide emissions.
Proponents of the standard, who note that passive homes often use up to 90 percent less heating and cooling energy than similar homes built to local code, say the Landaus embody the willingness of more homeowners to embrace passive building in the United States. Even Habitat for Humanity, the affordable-housing philanthropy, is now experimenting with the standard.
Yet the market remains minuscule, and the materials and expertise needed to build passive homes are often hard to find. While some 25,000 certified passive structures — from schools and commercial buildings to homes and apartment houses — have already been built in Europe, there are just 13 in the United States, with a few dozen more in the pipeline.
“Even though the passive house standard is tried and true, and is used all throughout Europe — we know it works, we know there’s some simplicity to it,” says Mrs. Landau, “here in the United States, we were reinventing the wheel.”
STEVEN LANDAU, a partner at a factory design firm in Burlington, Mass., was already an efficiency geek before the words “passive house” entered his vernacular. He’d long ago outfitted the family’s current home near Boston with a full complement of efficient gizmos and upgrades, including a high-efficiency German boiler and solar collection tubes designed to pull daylight into dark corners and hallways.
Arrays of futuristic-looking LED tubes illuminate the Landaus’ current basement, and a wattage meter keeps tabs on how much juice the home is consuming at any given time.
Mr. Landau was also well acquainted with the growing number of “green” building certifications and rating systems in the United States, including popular ones like the federal government’s Energy Star for Homes program and the LEED rating system, for Leadership in Energy and Environmental Design, from the United States Green Building Council.
The goals of these various systems vary widely. Some, like LEED, award points for a variety of environmentally friendly features, like using sustainable construction materials, in addition to energy efficiency. Others, like Energy Star, focus squarely on energy use.
But the most common green building standards, Mr. Landau said, fell short of his ambitions — which included avoiding any on-site use of fossil fuels. “I remember reading a book about someone in England in the 1980s who built a superinsulated house that was only heated by the body heat of the occupants and maybe a tea kettle,” Mr. Landau recalls. “I thought to myself, ‘Why can’t we build our houses that way?’ ”
Energy Star and LEED aim for efficiency improvements of at least 15 percent over conventional construction — and both programs can earn a variety of tax credits and other incentives. The passive-home standard, perhaps because it’s unfamiliar to many officials who create efficiency stimulus programs, is eligible for few direct government subsidies, despite the fact that homes using it can be up to 80 percent more energy-efficient, over all, than standard new houses and consume just 10 percent of the heating and cooling energy.
Add photovoltaic solar panels or other energy harvesting systems, and passive homes can quickly become zero-energy-use homes — or even power generators that can feed electricity back to the grid, according to Katrin Klingenberg, the director of the Passive House Institute-U.S. in Urbana, Ill.
Saturday, September 25, 2010
AIG Projects AIA 2010 Operating Profit of at Least $2 Billion
Sept. 26 (Bloomberg) -- American International Group Inc. said the Asian unit it’s going to divest in an initial public offering likely will have pretax operating profit of at least $2 billion for the fiscal year ending Nov. 30.
AIG is turning to an IPO after a $35.5 billion agreement to sell AIA Group Ltd. to Prudential Plc collapsed in May. Hong Kong-based AIA had about $1.84 billion in pretax operating profit in 2009, Prudential said in a March filing.
The American insurer is selling non-U.S. life insurance businesses after a $182.3 billion U.S. bailout in September 2008. AIG disclosed the profit forecast yesterday after providing it to certain analysts.
“We believe that, in the absence of unforeseen circumstances, and, on the bases and assumptions set forth below, our consolidated operating profit for the fiscal year ending 30 November 2010 is unlikely to be less than $2 billion,” the company said in a document released yesterday.
AIG also said AIA’s annualized new premiums gained 5 percent to $1.39 billion in the nine months ended Aug. 31, and total weighted premium income rose 11 percent to $9.33 billion in the same period.
On Aug. 6, AIG said second-quarter operating profit rose 17 percent, fueled by U.S. life insurance results. Net adjusted income of $1.34 billion, or $1.99 a share, rose from $1.14 billion, or $1.71, a year earlier. That was double the average estimate of two analysts surveyed by Bloomberg.
Chief Executive Officer Robert Benmosche told employees in a memo that day that the company has begun talking to regulators about “the process and terms of a complete government exit.”
AIG rose $1.40 to $36.47 in New York Stock Exchange composite trading on Sept. 24. The stock is up 22 percent year to date.
AIG is turning to an IPO after a $35.5 billion agreement to sell AIA Group Ltd. to Prudential Plc collapsed in May. Hong Kong-based AIA had about $1.84 billion in pretax operating profit in 2009, Prudential said in a March filing.
The American insurer is selling non-U.S. life insurance businesses after a $182.3 billion U.S. bailout in September 2008. AIG disclosed the profit forecast yesterday after providing it to certain analysts.
“We believe that, in the absence of unforeseen circumstances, and, on the bases and assumptions set forth below, our consolidated operating profit for the fiscal year ending 30 November 2010 is unlikely to be less than $2 billion,” the company said in a document released yesterday.
AIG also said AIA’s annualized new premiums gained 5 percent to $1.39 billion in the nine months ended Aug. 31, and total weighted premium income rose 11 percent to $9.33 billion in the same period.
On Aug. 6, AIG said second-quarter operating profit rose 17 percent, fueled by U.S. life insurance results. Net adjusted income of $1.34 billion, or $1.99 a share, rose from $1.14 billion, or $1.71, a year earlier. That was double the average estimate of two analysts surveyed by Bloomberg.
Chief Executive Officer Robert Benmosche told employees in a memo that day that the company has begun talking to regulators about “the process and terms of a complete government exit.”
AIG rose $1.40 to $36.47 in New York Stock Exchange composite trading on Sept. 24. The stock is up 22 percent year to date.
Friday, September 24, 2010
Zuckerberg Makes a $100 Million Gift to Newark’s Schools
PALO ALTO — Mark Zuckerberg, America’s youngest billionaire at 26, has not spent much money on himself. Forbes estimates his fortune at $6.9 billion, but Mr. Zuckerberg, chief executive of Facebook, has yet to sell any sizable portion of his holdings in the company.
Mark Zuckerberg last month with Facebook employees. On Friday, he gave away part of his estimated $6.9 billion fortune.
He rents an unremarkable house within walking distance of Facebook’s headquarters here. He favors jeans and T-shirts, drives an Acura and, unlike many other technology moguls, does not own a private plane.
On Friday, Mr. Zuckerberg announced his biggest expenditure to date: a $100 million grant aimed at improving public education in Newark, in partnership with Cory A. Booker, the city’s mayor, and Chris Christie, New Jersey’s governor.
Mr. Zuckerberg’s gift, which he announced during an appearance with Mr. Booker and Mr. Christie on “The Oprah Winfrey Show,” instantly propelled him to the top echelons of American philanthropy and made him something of a hero.
But there is a competing version of Mr. Zuckerberg’s public persona, one that is on display in the film “The Social Network,” a fictionalized story of Facebook’s founding that paints him as a backstabbing college student who betrayed friends and partners to assert control over Facebook.
The movie had its premiere on Friday at the New York Film Festival, just hours after Mr. Zuckerberg announced his philanthropic endeavor. And the timing of the gift raised questions as to whether Mr. Zuckerberg was simply trying to burnish his image at a difficult time.
“I don’t think anybody gives $100 million to anything if they are not thinking to some degree how it sheds light on their beneficence,” said David Kirkpatrick, the author of a recent book about the company called “The Facebook Effect.” “Otherwise they give anonymously.”
Mr. Zuckerberg says he was hoping to do just that. On the Oprah show and in a later press conference, Mr. Zuckerberg and Mr. Booker both said that the Facebook co-founder wanted to make his gift anonymous. But Mr. Booker persuaded him that the grant, which challenges New Jersey officials to raise matching funds, would be more effective if his name was attached to it. And they said that the timing was driven by factors out of their control.
“The movie became a complication,” Mr. Booker said, because of the risk that the public would view the gift as “an elaborate publicity stunt.”
Indeed, the announcement on the Oprah show, which showed clips of Mr. Zuckerberg and his longtime girlfriend Priscilla Chan in their home, was linked to a different movie, a documentary about public education called “Waiting for Superman” that opened Friday and that Ms. Winfrey has promoted for much of the last week.
Mr. Zuckerberg said that the $100 million would be used to start a new foundation called Startup: Education. The entire gift is earmarked for Newark and comes with no strings attached, giving “flexibility to try out new things,” he said.
Mr. Zuckerberg’s gift was praised in the philanthropy world.
“It is truly exceptional for any age group,” said Patrick M. Rooney, executive director of the Center on Philanthropy at Indiana University, which tracks giving. “Clearly when you look at most philanthropists, significant gifts like these are made late in life or after death. For someone to do this in their 20s is mind-boggling.”
Mr. Rooney said Mr. Zuckerberg’s is only the third gift of $100 million or more made this year in the United States. Last year, there were only six donations of that size or larger, he said.
Philanthropic giving in Silicon Valley and among technology moguls is not new. A number of legendary entrepreneurs, including Bill Hewlett and David Packard of Hewlett-Packard, Gordon Moore of Intel and Bill Gates of Microsoft have established large charitable foundations. But their giving typically came much later in life, after their companies and personal fortunes were well established.
A younger generation of Internet billionaires like Pierre Omidyar and Jeff Skoll, who made their fortunes with eBay, established foundations earlier.
“We have been seeing a very interesting phenomenon of dot-com billionaires making very generous gifts, in many cases with a different attitude than was in the past,” said Lester M. Salamon, director of the Center for Civil Society Studies at Johns Hopkins University. “People are striking it rich at an ever-earlier age.”
But even in those situations, those individuals established their philanthropies well after their companies went public. Mr. Zuckerberg’s gift is unusual, in part, because Facebook is still privately held, and there is no public market for its shares. Mr. Zuckerberg is giving shares to the foundation that will be sold to other private investors, a relatively new development in Silicon Valley.
Mr. Zuckerberg began discussing his plans to give away money with Ms. Chan, a former teacher who is now training to become a pediatrician, more than a year ago. The pair turned to Facebook’s No. 2 executive, Sheryl Sandberg, for advice. Ms. Sandberg, a veteran of the World Bank and the Treasury Department, had helped to establish Google.org, Google’s philanthropic arm.
Ms. Sandberg said she immediately arranged for Mr. Zuckerberg to meet prominent people in her network of contacts who helped him shape his plans. They included Michael R. Bloomberg, New York’s mayor, Joel Klein, the schools chief of New York, Wendy Kopp, the founder and president of Teach for America, and the philanthropist Eli Broad.
Mr. Zuckerberg also consulted with others including Mr. Gates and Arne Duncan, the education secretary. He firmed up the details this summer with Mr. Booker, whom he met at a conference of business moguls, and Mr. Christie.
“Growing up, I was really fortunate to go to some great schools,” Mr. Zuckerberg said during the press conference. He said he wanted to ensure that all children have similar opportunities.
“I really wanted to get started giving back at a young age,” he said.
Mark Zuckerberg last month with Facebook employees. On Friday, he gave away part of his estimated $6.9 billion fortune.
He rents an unremarkable house within walking distance of Facebook’s headquarters here. He favors jeans and T-shirts, drives an Acura and, unlike many other technology moguls, does not own a private plane.
On Friday, Mr. Zuckerberg announced his biggest expenditure to date: a $100 million grant aimed at improving public education in Newark, in partnership with Cory A. Booker, the city’s mayor, and Chris Christie, New Jersey’s governor.
Mr. Zuckerberg’s gift, which he announced during an appearance with Mr. Booker and Mr. Christie on “The Oprah Winfrey Show,” instantly propelled him to the top echelons of American philanthropy and made him something of a hero.
But there is a competing version of Mr. Zuckerberg’s public persona, one that is on display in the film “The Social Network,” a fictionalized story of Facebook’s founding that paints him as a backstabbing college student who betrayed friends and partners to assert control over Facebook.
The movie had its premiere on Friday at the New York Film Festival, just hours after Mr. Zuckerberg announced his philanthropic endeavor. And the timing of the gift raised questions as to whether Mr. Zuckerberg was simply trying to burnish his image at a difficult time.
“I don’t think anybody gives $100 million to anything if they are not thinking to some degree how it sheds light on their beneficence,” said David Kirkpatrick, the author of a recent book about the company called “The Facebook Effect.” “Otherwise they give anonymously.”
Mr. Zuckerberg says he was hoping to do just that. On the Oprah show and in a later press conference, Mr. Zuckerberg and Mr. Booker both said that the Facebook co-founder wanted to make his gift anonymous. But Mr. Booker persuaded him that the grant, which challenges New Jersey officials to raise matching funds, would be more effective if his name was attached to it. And they said that the timing was driven by factors out of their control.
“The movie became a complication,” Mr. Booker said, because of the risk that the public would view the gift as “an elaborate publicity stunt.”
Indeed, the announcement on the Oprah show, which showed clips of Mr. Zuckerberg and his longtime girlfriend Priscilla Chan in their home, was linked to a different movie, a documentary about public education called “Waiting for Superman” that opened Friday and that Ms. Winfrey has promoted for much of the last week.
Mr. Zuckerberg said that the $100 million would be used to start a new foundation called Startup: Education. The entire gift is earmarked for Newark and comes with no strings attached, giving “flexibility to try out new things,” he said.
Mr. Zuckerberg’s gift was praised in the philanthropy world.
“It is truly exceptional for any age group,” said Patrick M. Rooney, executive director of the Center on Philanthropy at Indiana University, which tracks giving. “Clearly when you look at most philanthropists, significant gifts like these are made late in life or after death. For someone to do this in their 20s is mind-boggling.”
Mr. Rooney said Mr. Zuckerberg’s is only the third gift of $100 million or more made this year in the United States. Last year, there were only six donations of that size or larger, he said.
Philanthropic giving in Silicon Valley and among technology moguls is not new. A number of legendary entrepreneurs, including Bill Hewlett and David Packard of Hewlett-Packard, Gordon Moore of Intel and Bill Gates of Microsoft have established large charitable foundations. But their giving typically came much later in life, after their companies and personal fortunes were well established.
A younger generation of Internet billionaires like Pierre Omidyar and Jeff Skoll, who made their fortunes with eBay, established foundations earlier.
“We have been seeing a very interesting phenomenon of dot-com billionaires making very generous gifts, in many cases with a different attitude than was in the past,” said Lester M. Salamon, director of the Center for Civil Society Studies at Johns Hopkins University. “People are striking it rich at an ever-earlier age.”
But even in those situations, those individuals established their philanthropies well after their companies went public. Mr. Zuckerberg’s gift is unusual, in part, because Facebook is still privately held, and there is no public market for its shares. Mr. Zuckerberg is giving shares to the foundation that will be sold to other private investors, a relatively new development in Silicon Valley.
Mr. Zuckerberg began discussing his plans to give away money with Ms. Chan, a former teacher who is now training to become a pediatrician, more than a year ago. The pair turned to Facebook’s No. 2 executive, Sheryl Sandberg, for advice. Ms. Sandberg, a veteran of the World Bank and the Treasury Department, had helped to establish Google.org, Google’s philanthropic arm.
Ms. Sandberg said she immediately arranged for Mr. Zuckerberg to meet prominent people in her network of contacts who helped him shape his plans. They included Michael R. Bloomberg, New York’s mayor, Joel Klein, the schools chief of New York, Wendy Kopp, the founder and president of Teach for America, and the philanthropist Eli Broad.
Mr. Zuckerberg also consulted with others including Mr. Gates and Arne Duncan, the education secretary. He firmed up the details this summer with Mr. Booker, whom he met at a conference of business moguls, and Mr. Christie.
“Growing up, I was really fortunate to go to some great schools,” Mr. Zuckerberg said during the press conference. He said he wanted to ensure that all children have similar opportunities.
“I really wanted to get started giving back at a young age,” he said.
Sensitive Index Climbs as Investors Seek Indian Haven for Economic Growth
Indian stocks advanced as investors judged the nation’s economic growth outlook provides a haven for equities after a drop in U.S. jobless rates damped the outlook for global expansion.
Hindustan Unilever Ltd., the local unit of the world’s second-largest consumer-goods maker, climbed for a seventh day to its highest level in at least 19 years. DLF Ltd., the nation’s biggest real estate developer, advanced 5 percent, its steepest gain since May. India’s government lifted the cap on foreign investment in bonds to increase funds available for roads and power plants.
“Investors have looked at the quality of companies in India and clearly they’re much better than what we see elsewhere in the region,” said Rahul Chadha, head of India equities at Mirae Asset Global Investment, in a Bloomberg Television interview today. “It’s a good structural story with strong domestic consumption and the economy remains in a sweet spot.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 184.17, or 0.9 percent, to 20,045.18, completing its longest weekly winning streak since April 9. The gauge has climbed 25 percent from a May 25 low, helping it breach 20,000 this week for the first time since January 2008, and putting it on course for its longest stretch of quarterly gains since at least 1979.
The S&P CNX Nifty Index on the National Stock Exchange advanced 1 percent to 6,018.30. The BSE 200 Index added 0.9 percent to 2,532.46.
Spending Plans
Hindustan Unilever advanced 3.8 percent to 314.95 rupees, its highest close since at least January 1991. DLF added 5 percent to 365.25 rupees, its steepest gain since May 10.
The foreign limit on government bonds due in more than five years was doubled to $10 billion, the Ministry of Finance said late yesterday. Investors were also allowed to buy $5 billion more obligations with similar maturities sold by infrastructure companies, boosting the permitted amount in corporate debentures to $20 billion.
India plans to double spending on building infrastructure projects to $1 trillion in the five years to 2017, according the country’s Planning Commission. The economy expanded 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
Valuations
U.S. applications for unemployment benefits unexpectedly rose last week, a sign companies in the world’s largest economy remain cautious about hiring as growth slows. The U.S. has fallen behind emerging markets in Brazil and India as the preferred place to invest, a September Bloomberg poll showed, while still ranking highest among all major developed countries.
Foreign fund inflows to India’s equities have increased 64 percent this year, making the benchmark index the most expensive in Asia and among the BRIC markets that also include Brazil, Russia and China. Stocks on the Sensex are valued at 19 times earnings, compared with 13 times for Brazil’s Bovespa Index, 7.7 times for Russia’s Micex Index and 15.9 times for China’s Shanghai Composite Index.
“Whether the market is going to fall or rise will depend on the fund inflows,” said Yogesh Radke, head of quantitative research at Edelweiss Securities Ltd. in Mumbai. “The current rally has been driven by foreign investors.” Overseas funds bought a net 15.1 billion rupees ($331 million) of Indian equities on Sept. 22, taking total investments in the stocks this year to 802.4 billion rupees, according to the nation’s market regulator.
Foreigners have invested 208.6 billion rupees in equities this month, compared with 116.9 billion rupees in August. The flows pushed the Sensex to the highest level in more than 2 1/2 years on Sept. 21 and helped the rupee rebound 4.8 percent from an eight-month low in May. Equity purchases this year include 216.4 billion rupees from the primary market, the regulator said.
Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years ago in local currency terms, as the biggest advance in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.
Hindustan Unilever Ltd., the local unit of the world’s second-largest consumer-goods maker, climbed for a seventh day to its highest level in at least 19 years. DLF Ltd., the nation’s biggest real estate developer, advanced 5 percent, its steepest gain since May. India’s government lifted the cap on foreign investment in bonds to increase funds available for roads and power plants.
“Investors have looked at the quality of companies in India and clearly they’re much better than what we see elsewhere in the region,” said Rahul Chadha, head of India equities at Mirae Asset Global Investment, in a Bloomberg Television interview today. “It’s a good structural story with strong domestic consumption and the economy remains in a sweet spot.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 184.17, or 0.9 percent, to 20,045.18, completing its longest weekly winning streak since April 9. The gauge has climbed 25 percent from a May 25 low, helping it breach 20,000 this week for the first time since January 2008, and putting it on course for its longest stretch of quarterly gains since at least 1979.
The S&P CNX Nifty Index on the National Stock Exchange advanced 1 percent to 6,018.30. The BSE 200 Index added 0.9 percent to 2,532.46.
Spending Plans
Hindustan Unilever advanced 3.8 percent to 314.95 rupees, its highest close since at least January 1991. DLF added 5 percent to 365.25 rupees, its steepest gain since May 10.
The foreign limit on government bonds due in more than five years was doubled to $10 billion, the Ministry of Finance said late yesterday. Investors were also allowed to buy $5 billion more obligations with similar maturities sold by infrastructure companies, boosting the permitted amount in corporate debentures to $20 billion.
India plans to double spending on building infrastructure projects to $1 trillion in the five years to 2017, according the country’s Planning Commission. The economy expanded 8.8 percent last quarter from a year earlier, the most among major economies after China and Brazil.
Valuations
U.S. applications for unemployment benefits unexpectedly rose last week, a sign companies in the world’s largest economy remain cautious about hiring as growth slows. The U.S. has fallen behind emerging markets in Brazil and India as the preferred place to invest, a September Bloomberg poll showed, while still ranking highest among all major developed countries.
Foreign fund inflows to India’s equities have increased 64 percent this year, making the benchmark index the most expensive in Asia and among the BRIC markets that also include Brazil, Russia and China. Stocks on the Sensex are valued at 19 times earnings, compared with 13 times for Brazil’s Bovespa Index, 7.7 times for Russia’s Micex Index and 15.9 times for China’s Shanghai Composite Index.
“Whether the market is going to fall or rise will depend on the fund inflows,” said Yogesh Radke, head of quantitative research at Edelweiss Securities Ltd. in Mumbai. “The current rally has been driven by foreign investors.” Overseas funds bought a net 15.1 billion rupees ($331 million) of Indian equities on Sept. 22, taking total investments in the stocks this year to 802.4 billion rupees, according to the nation’s market regulator.
Foreigners have invested 208.6 billion rupees in equities this month, compared with 116.9 billion rupees in August. The flows pushed the Sensex to the highest level in more than 2 1/2 years on Sept. 21 and helped the rupee rebound 4.8 percent from an eight-month low in May. Equity purchases this year include 216.4 billion rupees from the primary market, the regulator said.
Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years ago in local currency terms, as the biggest advance in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.
Thursday, September 23, 2010
The market for markets
India now has three stock exchanges (the BSE, the NSE and the USE) with a pan-India footprint and, if SEBI's will does not prevail, one more could be on the way. This suggests that there might be a market for markets; but what determines it? In the case of industries, manufacturing and services, when profits get very big, the big start moving in — if permitted to by the Government. In economics, such markets are called ‘contestable' because they permit free entry. A new firm need not even actually enter a market; the mere possibility that it may do so if the incumbents start making ‘super-normal' profits is enough to keep the latter from becoming too greedy. Who wants more competition? But does this theory apply to exchanges as well? Do they make such huge profits as to attract others into the arena in spite of the high cost of entry? Why are we seeing a proliferation of stock exchanges, especially in these days of intense regulation designed to keep hanky-panky at a minimum to reduce investor risk and where the pickings are probably very thin? What can a new stock exchange offer that entices customers in these days of standardised services and products?
Indeed, given the nature and functions of a stock exchange, a near-monopoly is generally the norm. And communications technology has now made it possible to have a near-monopoly on a national scale, not just at a local level. So one is entitled to ask: why do more firms want to start equity trading? At a simple level the answer — perhaps the only good one – is that they think their business offers few opportunities for growth and they need to diversify into new areas. Some amount of ego may also guide their actions, as when cash-rich firms take a dip in the aviation pool. Their judgement may be flawed but that can become known only later.
Conceptually, though, when large markets generate large profits, they tend to evolve into oligopolies where, even as the No 1 has over half of the market share, the remaining firms have larger shares of the total profit. This makes the return on investment worthwhile. More often than not, the existing structure can be tweaked or leveraged to permit an extension into a new line of business. For instance, a market-place for electronic trading in commodities can well be expanded to permit trading in equity or debt instruments, with a negligible cost of entry, and could well generate decent profits on a very low investment. The keenness of newer players wanting to set up a trading platform for all kinds of financial instruments need not alarm the market regulator. As long as the new entrants bring with them financial strength and an oversight system that guarantees transparency in price discovery, and transactions are settled efficiently, the regulator should welcome competition.
Indeed, given the nature and functions of a stock exchange, a near-monopoly is generally the norm. And communications technology has now made it possible to have a near-monopoly on a national scale, not just at a local level. So one is entitled to ask: why do more firms want to start equity trading? At a simple level the answer — perhaps the only good one – is that they think their business offers few opportunities for growth and they need to diversify into new areas. Some amount of ego may also guide their actions, as when cash-rich firms take a dip in the aviation pool. Their judgement may be flawed but that can become known only later.
Conceptually, though, when large markets generate large profits, they tend to evolve into oligopolies where, even as the No 1 has over half of the market share, the remaining firms have larger shares of the total profit. This makes the return on investment worthwhile. More often than not, the existing structure can be tweaked or leveraged to permit an extension into a new line of business. For instance, a market-place for electronic trading in commodities can well be expanded to permit trading in equity or debt instruments, with a negligible cost of entry, and could well generate decent profits on a very low investment. The keenness of newer players wanting to set up a trading platform for all kinds of financial instruments need not alarm the market regulator. As long as the new entrants bring with them financial strength and an oversight system that guarantees transparency in price discovery, and transactions are settled efficiently, the regulator should welcome competition.
Singh Debt Cap Doubles for Foreign Buyers to Finance Roads: India Credit
India lifted the cap on foreign investment in bonds for the first time in 18 months as Prime Minister Manmohan Singh seeks capital for building roads and power plants in a nation ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure.
The limit on government bonds was doubled to $10 billion, the Ministry of Finance said late yesterday. The money can only be used to buy sovereign debt due in more than five years. Singh’s administration also allowed overseas investors to buy $5 billion more obligations with similar maturities sold by infrastructure companies, boosting foreign investment in corporate debentures to $20 billion.
International investors, seeking to participate in the second-fastest pace of economic growth in Asia and reap higher yields than in the U.S., more than doubled holdings of India’s government and corporate debt this year to $17.2 billion as of Sept. 22, data from the Securities & Exchange Board of India show. Two-year sovereign notes yield 657 basis points more than similar-maturity Treasuries, about the most since Oct. 15, 2008.
“The thought process seems to be to try and draw in real investors,” Ananth Narayan G., the head of South Asian currency and bonds trading at Standard Chartered Plc in Mumbai, said in an interview yesterday. “It’s probably trying to get in pension funds, insurance money.”
Project Spending
India plans to double spending on building infrastructure projects to $1 trillion in the five years to 2017, according the country’s Planning Commission. The South Asian nation is ranked 89 out of 133 nations for its infrastructure, according to the World Economic Forum’s Global Competitiveness Index.
The last time India granted more quotas was in March 2009, when money fled emerging nations after global credit markets seized up. The government raised the ceiling on foreign investments in sovereign bonds to $5 billion from $3.2 billion in June 2008, while increasing the cap on corporate-debt investment to $15 billion from $6 billion in March 2009, according to a statement on the website of the Mumbai-based Securities & Exchange Board.
“The corporate debt market needed to be opened up for infrastructure investments to happen in a meaningful way,” said Indranil Pan, chief economist at Mumbai-based Kotak Mahindra Bank Ltd.
Holding Back Growth
Singh wants to tap private financing for at least half of the $1 trillion of construction projects targeted in the five years ending March 2017. The inadequacy of the nation’s utilities and transport network shaves 2 percentage points from growth, the Finance Ministry estimates. The economy has expanded an average 8.5 percent in the last five years.
The government plans to more than double spending to 20.5 trillion rupees to build ports, airports and other facilities in the five years ending March 2012 from the previous five-year period, according to a Planning Commission document released in March. Private companies may account for about 36 percent of the nation’s total spending on such projects between April 2007 and March 2012, versus 25 percent in the previous five-year period.
India’s 10-year bonds advanced after the new caps were unveiled and the government reduced its borrowing plan, pushing yields to the lowest level in more than a month yesterday. The yield on the 7.8 percent note due May 2020 fell 4 basis points, or 0.04 percentage point, to 7.90 percent, the lowest level since Aug. 17. The rupee lost 0.2 percent to 45.66 to a dollar.
‘Positive’
“The near-term impact will be positive on the rupee as and when the inflow comes into the country,” Dhawal Dalal, the head of fixed-income at DSP Blackrock Investment Managers Pvt. that oversees the equivalent of $5.2 billion, said in an interview yesterday. “It will be positive for banking liquidity as well.”
The increase in the cap may also help the government reduce its current-account deficit. The gap widened to $13 billion in the first quarter as an accelerating economy boosted imports of goods and machinery. The shortfall will expand this year, central bank Governor Duvvuri Subbarao said at a seminar in Buenos Aires on Sept. 3.
“If the government can attract foreign institutional investor flow in infrastructure, which is long-term money, it is going to help the development of infrastructure in the country in a big way,” DSP Blackrock’s Dalal said.
India’s 10-year bond rate is the highest among major economies except Brazil, where similar-maturity notes yield 12.2 percent. Comparable securities offer 7.61 percent in Russia and 3.23 percent in China and 2.54 percent in the U.S., according to data compiled by Bloomberg.
Yield Spreads
The difference in yields between India’s debt due in a decade and 10-year U.S. Treasuries widened to 541 basis points yesterday from 522 a week ago. The measure, which has averaged 318 since 2000, reached a two-year high of 556 on Aug. 26.
Overseas investors have pumped almost $17 billion into Indian equities this year, 60 percent more than in the same period of 2009, according to the Securities and Exchange Board of India. Accelerated inflows of overseas capital helped the rupee strengthen 3.1 percent against the dollar this month, the best performance among Asia’s 10-most traded currencies after South Korea’s won.
“The strong capital inflows will help ease the cash crunch in the coming months,” SBI Funds’ Munot said. “That will boost short-term debt prices, and investors who already own them will gain.”
The limit on government bonds was doubled to $10 billion, the Ministry of Finance said late yesterday. The money can only be used to buy sovereign debt due in more than five years. Singh’s administration also allowed overseas investors to buy $5 billion more obligations with similar maturities sold by infrastructure companies, boosting foreign investment in corporate debentures to $20 billion.
International investors, seeking to participate in the second-fastest pace of economic growth in Asia and reap higher yields than in the U.S., more than doubled holdings of India’s government and corporate debt this year to $17.2 billion as of Sept. 22, data from the Securities & Exchange Board of India show. Two-year sovereign notes yield 657 basis points more than similar-maturity Treasuries, about the most since Oct. 15, 2008.
“The thought process seems to be to try and draw in real investors,” Ananth Narayan G., the head of South Asian currency and bonds trading at Standard Chartered Plc in Mumbai, said in an interview yesterday. “It’s probably trying to get in pension funds, insurance money.”
Project Spending
India plans to double spending on building infrastructure projects to $1 trillion in the five years to 2017, according the country’s Planning Commission. The South Asian nation is ranked 89 out of 133 nations for its infrastructure, according to the World Economic Forum’s Global Competitiveness Index.
The last time India granted more quotas was in March 2009, when money fled emerging nations after global credit markets seized up. The government raised the ceiling on foreign investments in sovereign bonds to $5 billion from $3.2 billion in June 2008, while increasing the cap on corporate-debt investment to $15 billion from $6 billion in March 2009, according to a statement on the website of the Mumbai-based Securities & Exchange Board.
“The corporate debt market needed to be opened up for infrastructure investments to happen in a meaningful way,” said Indranil Pan, chief economist at Mumbai-based Kotak Mahindra Bank Ltd.
Holding Back Growth
Singh wants to tap private financing for at least half of the $1 trillion of construction projects targeted in the five years ending March 2017. The inadequacy of the nation’s utilities and transport network shaves 2 percentage points from growth, the Finance Ministry estimates. The economy has expanded an average 8.5 percent in the last five years.
The government plans to more than double spending to 20.5 trillion rupees to build ports, airports and other facilities in the five years ending March 2012 from the previous five-year period, according to a Planning Commission document released in March. Private companies may account for about 36 percent of the nation’s total spending on such projects between April 2007 and March 2012, versus 25 percent in the previous five-year period.
India’s 10-year bonds advanced after the new caps were unveiled and the government reduced its borrowing plan, pushing yields to the lowest level in more than a month yesterday. The yield on the 7.8 percent note due May 2020 fell 4 basis points, or 0.04 percentage point, to 7.90 percent, the lowest level since Aug. 17. The rupee lost 0.2 percent to 45.66 to a dollar.
‘Positive’
“The near-term impact will be positive on the rupee as and when the inflow comes into the country,” Dhawal Dalal, the head of fixed-income at DSP Blackrock Investment Managers Pvt. that oversees the equivalent of $5.2 billion, said in an interview yesterday. “It will be positive for banking liquidity as well.”
The increase in the cap may also help the government reduce its current-account deficit. The gap widened to $13 billion in the first quarter as an accelerating economy boosted imports of goods and machinery. The shortfall will expand this year, central bank Governor Duvvuri Subbarao said at a seminar in Buenos Aires on Sept. 3.
“If the government can attract foreign institutional investor flow in infrastructure, which is long-term money, it is going to help the development of infrastructure in the country in a big way,” DSP Blackrock’s Dalal said.
India’s 10-year bond rate is the highest among major economies except Brazil, where similar-maturity notes yield 12.2 percent. Comparable securities offer 7.61 percent in Russia and 3.23 percent in China and 2.54 percent in the U.S., according to data compiled by Bloomberg.
Yield Spreads
The difference in yields between India’s debt due in a decade and 10-year U.S. Treasuries widened to 541 basis points yesterday from 522 a week ago. The measure, which has averaged 318 since 2000, reached a two-year high of 556 on Aug. 26.
Overseas investors have pumped almost $17 billion into Indian equities this year, 60 percent more than in the same period of 2009, according to the Securities and Exchange Board of India. Accelerated inflows of overseas capital helped the rupee strengthen 3.1 percent against the dollar this month, the best performance among Asia’s 10-most traded currencies after South Korea’s won.
“The strong capital inflows will help ease the cash crunch in the coming months,” SBI Funds’ Munot said. “That will boost short-term debt prices, and investors who already own them will gain.”
India’s approach to games attacked
The Commonwealth Games Federation laid responsibility for the ramshackle preparations for next month’s games in New Delhi at the door of India, the host country, describing an approach similar to that portrayed in the film Monsoon Wedding as “unacceptable”.
Mike Hooper, the CGF’s chief executive, said India failed to honour commitments to complete games venues in good time. “We shouldn’t have been in this position,” he told NDTV, an Indian television network, adding that his organisation sounded the alarm about progress last year.
“We have a host city contract that clearly says that the responsibility for the implementation and delivery of all those promises that were made . . . were those of the government of India, the Delhi government and the organising committee,” Mr Hooper said. “We don't have the resources to deliver that. That comes down to the host.”
Although Mr Hooper said he detected a “sea change” after “frustrations boiled over” in recent days, he castigated the capital’s last-minute preparations for a global event that needed “systematic planning”.
“We’ve heard [Indian] ministers talk about a Monsoon Wedding approach,” Mr Hooper added. “That’s unacceptable.” M.S. Gill, the sports minister, had earlier assured critics that New Delhi would pull off the games at the last minute similar to the hurried arrangement of spectacular Indian weddings.
Mr Hooper's remarks, though intended to goad organisers to bring the games back on track, will deepen India’s sense of humiliation. They came as Manmohan Singh, India’s prime minister, held talks with New Delhi officials in an 11th-hour effort to save the blighted games.
As labourers were rushed in to clean up the filthy athlete’s accommodation, Suresh Kalmadi, the chairman of the Indian organising committee, denied that the games’ future hung in the balance. “There will be good games,” he insisted at the New Delhi international airport, where he received Mike Fennell, the CGF’s president. “We will look after everybody well and they’ll have a great time . . . no two ways about it.”
Mike Hooper, the CGF’s chief executive, said India failed to honour commitments to complete games venues in good time. “We shouldn’t have been in this position,” he told NDTV, an Indian television network, adding that his organisation sounded the alarm about progress last year.
“We have a host city contract that clearly says that the responsibility for the implementation and delivery of all those promises that were made . . . were those of the government of India, the Delhi government and the organising committee,” Mr Hooper said. “We don't have the resources to deliver that. That comes down to the host.”
Although Mr Hooper said he detected a “sea change” after “frustrations boiled over” in recent days, he castigated the capital’s last-minute preparations for a global event that needed “systematic planning”.
“We’ve heard [Indian] ministers talk about a Monsoon Wedding approach,” Mr Hooper added. “That’s unacceptable.” M.S. Gill, the sports minister, had earlier assured critics that New Delhi would pull off the games at the last minute similar to the hurried arrangement of spectacular Indian weddings.
Mr Hooper's remarks, though intended to goad organisers to bring the games back on track, will deepen India’s sense of humiliation. They came as Manmohan Singh, India’s prime minister, held talks with New Delhi officials in an 11th-hour effort to save the blighted games.
As labourers were rushed in to clean up the filthy athlete’s accommodation, Suresh Kalmadi, the chairman of the Indian organising committee, denied that the games’ future hung in the balance. “There will be good games,” he insisted at the New Delhi international airport, where he received Mike Fennell, the CGF’s president. “We will look after everybody well and they’ll have a great time . . . no two ways about it.”
India Cuts Planned Bond Sales by 6% for Second Half as Cash Inflows Rise
India cut its planned debt sales for the second half of the fiscal year by 6 percent as revenue from taxes and phone license fees bolstered its finances.
The federal government plans to raise 1.63 trillion rupees ($35.7 billion) selling bonds in the six months ending March 31, lower than an earlier plan for 1.73 trillion rupees, Finance Secretary Ashok Chawla told reporters in New Delhi today. India will sell 100 billion rupees to 110 billion rupees of debt every week and may complete its borrowings by the second week of February, he said.
“Looking at the projected cash flows and funding requirements, it seems it will not be necessary to raise the whole amount,” Chawla said.
India expects revenue from government asset sales, auction of third-generation mobile-phone spectrum and tax collections to help it cut the deficit by the sharpest in 19 years. Finance Minister Pranab Mukherjee aims to narrow the government’s budget deficit to 5.5 percent of gross domestic product by March 31 from 6.9 percent in the previous year.
Benchmark bonds gained, pushing 10-year yields to the lowest level in more than a month. The yield on the 7.8 percent note due 2020 fell 4 basis points, or 0.04 percentage point, to 7.90 percent as of the 5 p.m. close in Mumbai, according to the central bank’s trading system.
The Reserve Bank of India, which conducts debt sales for the government, will manage the borrowings in a non-disruptive manner while ensuring adequate funds are available for companies, Deputy Governor Shyamala Gopinath said in New Delhi.
The government has borrowed 2.62 trillion rupees this fiscal year that began April 1, according to data compiled by Bloomberg, while the rest for the first half will be completed tomorrow when it sells 110 billion rupees in debt.
The federal government plans to raise 1.63 trillion rupees ($35.7 billion) selling bonds in the six months ending March 31, lower than an earlier plan for 1.73 trillion rupees, Finance Secretary Ashok Chawla told reporters in New Delhi today. India will sell 100 billion rupees to 110 billion rupees of debt every week and may complete its borrowings by the second week of February, he said.
“Looking at the projected cash flows and funding requirements, it seems it will not be necessary to raise the whole amount,” Chawla said.
India expects revenue from government asset sales, auction of third-generation mobile-phone spectrum and tax collections to help it cut the deficit by the sharpest in 19 years. Finance Minister Pranab Mukherjee aims to narrow the government’s budget deficit to 5.5 percent of gross domestic product by March 31 from 6.9 percent in the previous year.
Benchmark bonds gained, pushing 10-year yields to the lowest level in more than a month. The yield on the 7.8 percent note due 2020 fell 4 basis points, or 0.04 percentage point, to 7.90 percent as of the 5 p.m. close in Mumbai, according to the central bank’s trading system.
The Reserve Bank of India, which conducts debt sales for the government, will manage the borrowings in a non-disruptive manner while ensuring adequate funds are available for companies, Deputy Governor Shyamala Gopinath said in New Delhi.
The government has borrowed 2.62 trillion rupees this fiscal year that began April 1, according to data compiled by Bloomberg, while the rest for the first half will be completed tomorrow when it sells 110 billion rupees in debt.
U.S. Is Said to Rein in G.M. Stock Offering
DETROIT — The initial public stock offering by General Motors will be smaller than previously suggested, and the federal government will most likely sell a relatively small portion of its 61 percent stake in the company, according to people with knowledge of the preparations.
To fetch the highest possible price for the government, G.M. is planning an overall offering of stock valued at $8 billion to $10 billion, which is lower than previous internal targets, according to the people, who spoke on the condition of anonymity because of restrictions on public comments before an offering.
Earlier, there were suggestions the stock offering could rival the largest in United States history, when the credit card giant Visa raised more than $19 billion in 2008. G.M. and its bankers had been pushing for the largest possible offering because that would mean higher fees for the bankers and a larger pool of investors for G.M.
But the Treasury Department has made it clear to G.M. and its underwriters that the government is more interested in setting the highest price possible for the stock rather than maximizing the size of the offering. While both G.M. and the Treasury still hope to reduce the government’s stake in the company to less than 50 percent and rid the company of its Government Motors nickname, that goal may not be met, one of the people said.
The market for initial public offerings has been weak this year, causing concern by Treasury officials that the G.M. stock sale would struggle if it were too large.
Auto analysts are increasingly projecting that G.M. shares could be priced high enough for the government eventually to get back most or all of its remaining $43 billion investment in the automaker. But everyone agrees that will take years.
The offering, which is expected as early as November, will set a benchmark for the stock’s value.
In order to recover all of the government’s investment, the Treasury would have to sell its 304 million shares at an average price of $133.78 a share, before any splits, according to Neil M. Barofsky, the special inspector general for the Troubled Assets Relief Program of the Treasury.
Mr. Barofsky cited that figure in a letter last month to Senator Charles E. Grassley, Republican of Iowa, who asked Mr. Barofsky to audit the stock sale.
In the letter, Mr. Barofsky pledged to review G.M.’s stock offering after its approval by federal regulators to ensure that it produced “the highest return for the American taxpayers.”
The price cited by Mr. Barofsky might not be unrealistic, said David Whiston, an automotive equity analyst with Morningstar in Chicago. Mr. Whiston said on Thursday that a G.M. share could be worth $134, though he believed it would sell for less than that.
He said that G.M., after last year’s government-sponsored bankruptcy, had made changes that would help it thrive as demand for new vehicles recovers from today’s levels, which most industry experts consider to be unsustainably low.
“It really is a new G.M.,” Mr. Whiston said. “The cynics of this deal, I don’t think they really understand the billions of cost savings that G.M. has made.”
G.M.’s stock peaked in April 2000 at $94.63 a share.
Although President Obama has said he wants the government to divest as quickly as practical, the Treasury is expected to sell off its interest over at least two to three years. That would allow it to take advantage of increases in the value of its shares, assuming G.M. operates profitably.
“If G.M. continues to improve and the industry continues to improve, they have a shot at getting it all back,” said Michael Ward, an analyst with Soleil Securities.
There is considerable interest about the G.M. offering among potential investors, and the sale is likely to do well, Mr. Ward told members of the Society of Automotive Analysts on Thursday in Southfield, Mich.
“Wall Street is going to be in love with General Motors,” he said.
The size and the price of the stock offering have not yet been decided, the people with knowledge of the preparations said. But the Treasury intends to reserve a large portion of the stock for retail investors.
As part of that push, G.M. intends to split the stock so that it is priced about $20 to $25 a share, these people said.
The Treasury has also declined to set specific limits on where the stock will be sold and to whom. In a statement last week, the Treasury said it expected the bulk of the stock to be sold in North America.
The government would not expressly restrict sales to foreign buyers, these people said, but they added that acquisitions by foreign investors would be limited.
In a related matter, G.M. filed an amended version of the registration paperwork for its offering with the Securities and Exchange Commission on Thursday, but it did not reveal details.
The filing included a letter to the Treasury in which company executives committed to using “commercially reasonable best efforts” to manufacture at least 1.6 million vehicles in the United States this year and an increased number in each of the next four years.
The figures are 90 percent of what G.M. had previously agreed to produce under its loan agreements with the Treasury.
The letter also says that AmeriCredit, a subprime financing company that G.M. is buying, plans to sell its private plane in accordance with restrictions placed on companies that received aid from the Treasury’s bailout program.
To fetch the highest possible price for the government, G.M. is planning an overall offering of stock valued at $8 billion to $10 billion, which is lower than previous internal targets, according to the people, who spoke on the condition of anonymity because of restrictions on public comments before an offering.
Earlier, there were suggestions the stock offering could rival the largest in United States history, when the credit card giant Visa raised more than $19 billion in 2008. G.M. and its bankers had been pushing for the largest possible offering because that would mean higher fees for the bankers and a larger pool of investors for G.M.
But the Treasury Department has made it clear to G.M. and its underwriters that the government is more interested in setting the highest price possible for the stock rather than maximizing the size of the offering. While both G.M. and the Treasury still hope to reduce the government’s stake in the company to less than 50 percent and rid the company of its Government Motors nickname, that goal may not be met, one of the people said.
The market for initial public offerings has been weak this year, causing concern by Treasury officials that the G.M. stock sale would struggle if it were too large.
Auto analysts are increasingly projecting that G.M. shares could be priced high enough for the government eventually to get back most or all of its remaining $43 billion investment in the automaker. But everyone agrees that will take years.
The offering, which is expected as early as November, will set a benchmark for the stock’s value.
In order to recover all of the government’s investment, the Treasury would have to sell its 304 million shares at an average price of $133.78 a share, before any splits, according to Neil M. Barofsky, the special inspector general for the Troubled Assets Relief Program of the Treasury.
Mr. Barofsky cited that figure in a letter last month to Senator Charles E. Grassley, Republican of Iowa, who asked Mr. Barofsky to audit the stock sale.
In the letter, Mr. Barofsky pledged to review G.M.’s stock offering after its approval by federal regulators to ensure that it produced “the highest return for the American taxpayers.”
The price cited by Mr. Barofsky might not be unrealistic, said David Whiston, an automotive equity analyst with Morningstar in Chicago. Mr. Whiston said on Thursday that a G.M. share could be worth $134, though he believed it would sell for less than that.
He said that G.M., after last year’s government-sponsored bankruptcy, had made changes that would help it thrive as demand for new vehicles recovers from today’s levels, which most industry experts consider to be unsustainably low.
“It really is a new G.M.,” Mr. Whiston said. “The cynics of this deal, I don’t think they really understand the billions of cost savings that G.M. has made.”
G.M.’s stock peaked in April 2000 at $94.63 a share.
Although President Obama has said he wants the government to divest as quickly as practical, the Treasury is expected to sell off its interest over at least two to three years. That would allow it to take advantage of increases in the value of its shares, assuming G.M. operates profitably.
“If G.M. continues to improve and the industry continues to improve, they have a shot at getting it all back,” said Michael Ward, an analyst with Soleil Securities.
There is considerable interest about the G.M. offering among potential investors, and the sale is likely to do well, Mr. Ward told members of the Society of Automotive Analysts on Thursday in Southfield, Mich.
“Wall Street is going to be in love with General Motors,” he said.
The size and the price of the stock offering have not yet been decided, the people with knowledge of the preparations said. But the Treasury intends to reserve a large portion of the stock for retail investors.
As part of that push, G.M. intends to split the stock so that it is priced about $20 to $25 a share, these people said.
The Treasury has also declined to set specific limits on where the stock will be sold and to whom. In a statement last week, the Treasury said it expected the bulk of the stock to be sold in North America.
The government would not expressly restrict sales to foreign buyers, these people said, but they added that acquisitions by foreign investors would be limited.
In a related matter, G.M. filed an amended version of the registration paperwork for its offering with the Securities and Exchange Commission on Thursday, but it did not reveal details.
The filing included a letter to the Treasury in which company executives committed to using “commercially reasonable best efforts” to manufacture at least 1.6 million vehicles in the United States this year and an increased number in each of the next four years.
The figures are 90 percent of what G.M. had previously agreed to produce under its loan agreements with the Treasury.
The letter also says that AmeriCredit, a subprime financing company that G.M. is buying, plans to sell its private plane in accordance with restrictions placed on companies that received aid from the Treasury’s bailout program.
Monday, September 20, 2010
Vedanta Billionaire Agarwal Risks 30% Return by Tracking BHP
Mining billionaire Anil Agarwal, who delivered 30 percent gains to shareholders in the past five years, plans to spend $9.6 billion to replicate the strategy of BHP Billiton Ltd., a rival that’s posted smaller returns.
Agarwal’s Vedanta Resources Plc plans to buy a controlling stake in Cairn India Ltd. and get access to the nation’s biggest onshore oilfield. His first foray into petroleum will echo the structure of BHP, the Australian mining company that first ventured into oil in 1967 and delivered average annual gains of 20 percent since 2005.
The acquisition may compromise Vedanta’s growth after the company takes on $6.5 billion in debt to finance the purchase, said Jeremy Cave, an analyst at MF Global Securities Ltd. in London. Standard & Poor’s and Moody’s Investors Service are reviewing Vedanta’s credit ratings, and its shares slid 14 percent in the two weeks following the deal’s announcement.
BHP’s “diversification is spread around the world, whereas Vedanta’s assets are concentrated in India so there’ll be more risk attached,” said Walter Rossini, a fund manager at Aletti Gestielle Sgr SpA in Milan, who helps manage $350 million including shares in Vedanta’s Sterlite Industries and in Cairn India. “From the point of view of a shareholder, I would prefer a bit of the cash on Vedanta’s books comes to me.”
Founding Vedanta
Agarwal, 56, was born in Patna in Bihar state as the son of a cable and wire maker. Leaving school at 15, he took charge of his father’s business before establishing Vedanta in 1976 as a scrap-metal dealership in Mumbai, a job that showed him the importance of raw materials in industry, he said in an August interview in London.
Agarwal began to build his metals empire by acquiring copper-cable producer Shamsher Sterling Corp. from the king of Nepal in 1979, obtaining a bank loan for the $1,070 purchase. Adding Australian copper mines in 1999, aluminum and zinc producers over the next three years and iron-ore exporter Sesa Goa Ltd. for $981 million in 2007, the entrepreneur parlayed his scrap-metal startup into a $30 billion group of companies.
BHP also began as a minerals producer, focusing on silver, lead and zinc before moving into energy, and now has oil and gas operations from the Gulf of Mexico to Pakistan. The expansion proved lucrative, with underlying profit from its petroleum unit almost doubling since 2005. BHP bought Billiton Plc in 2001 for $11.6 billion.
BHP succeeds by buying “very large assets” to supply a significant chunk of a commodity, keeping production costs down and forcing out smaller rivals, said Cave at MF Global.
Financing Costs
Vedanta, which intends to fund part of the Cairn deal with cash from its Sesa Goa unit as well as bank loans, faces higher financing costs in pursuit of an expansion into oil.
Companies with credit ratings below investment grade, such as Vedanta, pay average loan interest margins of 413 basis points over benchmark rates, compared with 307 basis points in 2007, according to data compiled by Bloomberg.
The cost of borrowing for investment-grade companies such as BHP has dropped. BHP, bidding to acquire Potash Corp. of Saskatchewan Inc., is paying a margin of 70 to 140 basis points on a $25 billion one-year loan that can be extended by a year, it said Aug. 20. BHP has cut debt by 41 percent to $3.3 billion.
Vedanta, which agreed in May to pay Anglo American Plc $1.34 billion for zinc mines in Africa and Ireland, is snapping up assets even after announcing a doubling in its share buyback program. The London-based company this year raised its buyback plan to $825 million from $350 million, Agarwal said in Vedanta’s annual report.
Shift to Oil
“Why do a deal?” said Paul Cliff, a London-based analyst at Nomura Holdings Inc., after the Cairn deal was announced. “There is no previous experience in oil and gas. It’s a concern for investors because Vedanta is a metals and mining house with one of the most aggressive organic-growth profiles.”
Vedanta has an $8 billion plan to increase its aluminum smelting and refining capacity sixfold. The company also intends to spend $20 billion in India over four years on mines and power plants, it said in 2008.
“We struggle to identify synergies from the transaction and see little link between Cairn India and Vedanta’s existing energy-generation assets, and we do not view it as a hedge on energy,” Fawzi Hanano, an analyst at UBS AG, said last month.
Worker Protests
Agarwal is no stranger to opposition to his expansion plans. His acquisition of Indian state companies Bharat Aluminium Co. and Hindustan Zinc Ltd. in 2001 prompted protests from opposition parties and workers, who staged a two-month strike on concern the new owner may cut jobs.
“Each time, he has managed to settle” these conflicts, said Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi. He has a “very compelling rags-to-riches story that has been tested many times.”
The mining mogul is yet to convince India’s political elite that he’s best-placed to develop the country’s petroleum and mineral riches. The Oil Ministry responded to Vedanta’s Cairn bid by asking state-owned Oil & Natural Gas Corp. to study a counter-offer.
Buying Cairn India would give Vedanta access to Rajasthan’s Mangala oilfield, which produces about 125,000 barrels a day, equivalent to about 19 percent of the country’s annual output.
“India is always hungry for energy and that makes it a big market,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, India, said Sept. 7. Still, “investors would be concerned because this is a new business for them. Success is not guaranteed.”
Agarwal’s Vedanta Resources Plc plans to buy a controlling stake in Cairn India Ltd. and get access to the nation’s biggest onshore oilfield. His first foray into petroleum will echo the structure of BHP, the Australian mining company that first ventured into oil in 1967 and delivered average annual gains of 20 percent since 2005.
The acquisition may compromise Vedanta’s growth after the company takes on $6.5 billion in debt to finance the purchase, said Jeremy Cave, an analyst at MF Global Securities Ltd. in London. Standard & Poor’s and Moody’s Investors Service are reviewing Vedanta’s credit ratings, and its shares slid 14 percent in the two weeks following the deal’s announcement.
BHP’s “diversification is spread around the world, whereas Vedanta’s assets are concentrated in India so there’ll be more risk attached,” said Walter Rossini, a fund manager at Aletti Gestielle Sgr SpA in Milan, who helps manage $350 million including shares in Vedanta’s Sterlite Industries and in Cairn India. “From the point of view of a shareholder, I would prefer a bit of the cash on Vedanta’s books comes to me.”
Founding Vedanta
Agarwal, 56, was born in Patna in Bihar state as the son of a cable and wire maker. Leaving school at 15, he took charge of his father’s business before establishing Vedanta in 1976 as a scrap-metal dealership in Mumbai, a job that showed him the importance of raw materials in industry, he said in an August interview in London.
Agarwal began to build his metals empire by acquiring copper-cable producer Shamsher Sterling Corp. from the king of Nepal in 1979, obtaining a bank loan for the $1,070 purchase. Adding Australian copper mines in 1999, aluminum and zinc producers over the next three years and iron-ore exporter Sesa Goa Ltd. for $981 million in 2007, the entrepreneur parlayed his scrap-metal startup into a $30 billion group of companies.
BHP also began as a minerals producer, focusing on silver, lead and zinc before moving into energy, and now has oil and gas operations from the Gulf of Mexico to Pakistan. The expansion proved lucrative, with underlying profit from its petroleum unit almost doubling since 2005. BHP bought Billiton Plc in 2001 for $11.6 billion.
BHP succeeds by buying “very large assets” to supply a significant chunk of a commodity, keeping production costs down and forcing out smaller rivals, said Cave at MF Global.
Financing Costs
Vedanta, which intends to fund part of the Cairn deal with cash from its Sesa Goa unit as well as bank loans, faces higher financing costs in pursuit of an expansion into oil.
Companies with credit ratings below investment grade, such as Vedanta, pay average loan interest margins of 413 basis points over benchmark rates, compared with 307 basis points in 2007, according to data compiled by Bloomberg.
The cost of borrowing for investment-grade companies such as BHP has dropped. BHP, bidding to acquire Potash Corp. of Saskatchewan Inc., is paying a margin of 70 to 140 basis points on a $25 billion one-year loan that can be extended by a year, it said Aug. 20. BHP has cut debt by 41 percent to $3.3 billion.
Vedanta, which agreed in May to pay Anglo American Plc $1.34 billion for zinc mines in Africa and Ireland, is snapping up assets even after announcing a doubling in its share buyback program. The London-based company this year raised its buyback plan to $825 million from $350 million, Agarwal said in Vedanta’s annual report.
Shift to Oil
“Why do a deal?” said Paul Cliff, a London-based analyst at Nomura Holdings Inc., after the Cairn deal was announced. “There is no previous experience in oil and gas. It’s a concern for investors because Vedanta is a metals and mining house with one of the most aggressive organic-growth profiles.”
Vedanta has an $8 billion plan to increase its aluminum smelting and refining capacity sixfold. The company also intends to spend $20 billion in India over four years on mines and power plants, it said in 2008.
“We struggle to identify synergies from the transaction and see little link between Cairn India and Vedanta’s existing energy-generation assets, and we do not view it as a hedge on energy,” Fawzi Hanano, an analyst at UBS AG, said last month.
Worker Protests
Agarwal is no stranger to opposition to his expansion plans. His acquisition of Indian state companies Bharat Aluminium Co. and Hindustan Zinc Ltd. in 2001 prompted protests from opposition parties and workers, who staged a two-month strike on concern the new owner may cut jobs.
“Each time, he has managed to settle” these conflicts, said Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi. He has a “very compelling rags-to-riches story that has been tested many times.”
The mining mogul is yet to convince India’s political elite that he’s best-placed to develop the country’s petroleum and mineral riches. The Oil Ministry responded to Vedanta’s Cairn bid by asking state-owned Oil & Natural Gas Corp. to study a counter-offer.
Buying Cairn India would give Vedanta access to Rajasthan’s Mangala oilfield, which produces about 125,000 barrels a day, equivalent to about 19 percent of the country’s annual output.
“India is always hungry for energy and that makes it a big market,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. in Kochi, India, said Sept. 7. Still, “investors would be concerned because this is a new business for them. Success is not guaranteed.”
H.P. Settles Lawsuit Against Hurd
SAN FRANCISCO — A fierce and public feud between Oracle and Hewlett-Packard, two of the world’s largest technology companies, has ended after all of two weeks.
Oracle’s president, Mark Hurd, delivered a keynote address during the 2010 Oracle Open World conference in San Francisco on Monday.
On Monday, the companies announced a settlement to a dispute that centered on Oracle’s hiring of Mark V. Hurd, the former chief executive of H.P., as a president. H.P. sued Mr. Hurd this month, claiming he would violate agreements to protect H.P.’s secrets by taking on such a high-level role at Oracle. The parties declined to reveal details about the settlement but said Mr. Hurd would protect H.P.’s confidential information.
However, in a filing with the Securities and Exchange Commission on Monday, H.P. said it had modified its separation agreement with Mr. Hurd. He effectively waived about half the compensation owed him. Mr. Hurd agreed to give up his rights to the 330,177 performance-based restricted stock units granted to him on Jan. 17, 2008, and to the 15,853 time-based restricted stock units granted on Dec. 11, 2009.
Although most legal analysts said H.P. had had little chance of winning its case, the lawsuit immediately strained the business relationship between the two companies. Oracle and H.P. have a long history of selling technology together. About 40 percent of Oracle’s business software runs on computing systems sold by H.P., and the companies have 140,000 customers in common. After the lawsuit was filed — 19 hours after Oracle hired Mr. Hurd — Lawrence J. Ellison, Oracle’s chief executive, warned that H.P.’s actions threatened to derail the companies’ longstanding partnership.
The companies took pains on Monday to say that the business relationship was again on firm footing. “H.P. and Oracle have been important partners for more than 20 years and are committed to working together to provide exceptional products and service to our customers,” Cathie A. Lesjak, the chief financial officer and interim chief executive at H.P., said in a statement. “We look forward to collaborating with Oracle in the future.”
Mr. Ellison said in his statement, “Oracle and H.P. will continue to build and expand a partnership that has already lasted for over 25 years.”
“The partnership is clearly very important here,” said David M. Hilal, senior managing director at FBR Capital Markets. “It’s undoubtedly an effort to kiss and make up.”
Mr. Hilal said Mr. Hurd would probably be prohibited from making decisions at Oracle that would allow him to use confidential information from H.P., like its acquisition plans. The relationship between the two companies began to fray after Mr. Hurd resigned from H.P. last month.
In an e-mail to The New York Times, Mr. Ellison, a close friend of Mr. Hurd’s, lambasted H.P.’s board for the way it had handled the departure. Mr. Hurd left H.P. after the board investigated his relationship with a marketing contractor and found that her name had been left off expense report items and that Mr. Hurd had violated the company’s code of conduct.
“In losing Mark Hurd, the H.P. board failed to act in the best interest of H.P.’s employees, shareholders, customers and partners,” Mr. Ellison wrote.
This month, Oracle hired Mr. Hurd to succeed Charles E. Phillips Jr. as a president at the company. While the legal matter has been resolved, Oracle and H.P. will continue to have a more tense business relationship than in the past.
Oracle’s acquisition this year of Sun Microsystems thrust it into the computer hardware business, one of H.P.’s strong suits.
At the Oracle Open World customer event here this week, Oracle executives talked at length about their plans to conquer the hardware market. Mr. Ellison, in particular, made an impassioned pitch on Sunday evening, just minutes after Ann M. Livermore, an H.P. executive vice president in charge of enterprise computing, delivered a similar message to the audience.
Oracle executives have voiced their interest in acquiring more hardware companies, and H.P. remains on the prowl, making some recent big-ticket purchases. H.P. has made three major acquisitions since Mr. Hurd left the company: 3Par, a computer storage company, for $2.35 billion; ArcSight, a computer security company, for $1.5 billion; and Stratavia, a privately held database and application automation company, for an undisclosed amount.
H.P. also remains in the hunt for a new chief executive.
Oracle’s president, Mark Hurd, delivered a keynote address during the 2010 Oracle Open World conference in San Francisco on Monday.
On Monday, the companies announced a settlement to a dispute that centered on Oracle’s hiring of Mark V. Hurd, the former chief executive of H.P., as a president. H.P. sued Mr. Hurd this month, claiming he would violate agreements to protect H.P.’s secrets by taking on such a high-level role at Oracle. The parties declined to reveal details about the settlement but said Mr. Hurd would protect H.P.’s confidential information.
However, in a filing with the Securities and Exchange Commission on Monday, H.P. said it had modified its separation agreement with Mr. Hurd. He effectively waived about half the compensation owed him. Mr. Hurd agreed to give up his rights to the 330,177 performance-based restricted stock units granted to him on Jan. 17, 2008, and to the 15,853 time-based restricted stock units granted on Dec. 11, 2009.
Although most legal analysts said H.P. had had little chance of winning its case, the lawsuit immediately strained the business relationship between the two companies. Oracle and H.P. have a long history of selling technology together. About 40 percent of Oracle’s business software runs on computing systems sold by H.P., and the companies have 140,000 customers in common. After the lawsuit was filed — 19 hours after Oracle hired Mr. Hurd — Lawrence J. Ellison, Oracle’s chief executive, warned that H.P.’s actions threatened to derail the companies’ longstanding partnership.
The companies took pains on Monday to say that the business relationship was again on firm footing. “H.P. and Oracle have been important partners for more than 20 years and are committed to working together to provide exceptional products and service to our customers,” Cathie A. Lesjak, the chief financial officer and interim chief executive at H.P., said in a statement. “We look forward to collaborating with Oracle in the future.”
Mr. Ellison said in his statement, “Oracle and H.P. will continue to build and expand a partnership that has already lasted for over 25 years.”
“The partnership is clearly very important here,” said David M. Hilal, senior managing director at FBR Capital Markets. “It’s undoubtedly an effort to kiss and make up.”
Mr. Hilal said Mr. Hurd would probably be prohibited from making decisions at Oracle that would allow him to use confidential information from H.P., like its acquisition plans. The relationship between the two companies began to fray after Mr. Hurd resigned from H.P. last month.
In an e-mail to The New York Times, Mr. Ellison, a close friend of Mr. Hurd’s, lambasted H.P.’s board for the way it had handled the departure. Mr. Hurd left H.P. after the board investigated his relationship with a marketing contractor and found that her name had been left off expense report items and that Mr. Hurd had violated the company’s code of conduct.
“In losing Mark Hurd, the H.P. board failed to act in the best interest of H.P.’s employees, shareholders, customers and partners,” Mr. Ellison wrote.
This month, Oracle hired Mr. Hurd to succeed Charles E. Phillips Jr. as a president at the company. While the legal matter has been resolved, Oracle and H.P. will continue to have a more tense business relationship than in the past.
Oracle’s acquisition this year of Sun Microsystems thrust it into the computer hardware business, one of H.P.’s strong suits.
At the Oracle Open World customer event here this week, Oracle executives talked at length about their plans to conquer the hardware market. Mr. Ellison, in particular, made an impassioned pitch on Sunday evening, just minutes after Ann M. Livermore, an H.P. executive vice president in charge of enterprise computing, delivered a similar message to the audience.
Oracle executives have voiced their interest in acquiring more hardware companies, and H.P. remains on the prowl, making some recent big-ticket purchases. H.P. has made three major acquisitions since Mr. Hurd left the company: 3Par, a computer storage company, for $2.35 billion; ArcSight, a computer security company, for $1.5 billion; and Stratavia, a privately held database and application automation company, for an undisclosed amount.
H.P. also remains in the hunt for a new chief executive.
India’s Sahara in talks to rescue MGM
Sahara India Pariwar, an Indian media-to-sports conglomerate, is in talks to rescue Metro-Goldwyn-Mayer, the debt-ridden Hollywood studio, in a move that would deepen ties between Bollywood and Hollywood.
The Indian group, controlled by billionaire industrialist Subrata Roy, is prepared to pay up to half of the $3.7bn debt accumulated by the famed US film studio, which owns ‘Gone with the Wind’ and the James Bond series, according to a person familiar with the matter, Sahara would receive an equity stake in the company in return.
Sahara had no official comment on Monday except to confirm that the two companies were in talks. “On mutual interest, discussions are on, but it is too early to comment on the issue,” it said, stressing that the talks were at an early stage.
Shares in Sahara One Media and Entertainment, a listed subsidiary of Sahara India Pariwar, rose as much as 5.49 per cent in early trading on Monday in Mumbai, while the Bombay Stock Exchange’s benchmark Sensex traded up 1.27 per cent.
MGM has been in the hands of its lenders for almost a year after it became unable to service its huge debt, amassed when it was taken over in 2005 by a consortium comprising private equity firms, Sony and Comcast.
Several potential buyers have had their eye on MGM in the past year, including Anil Ambani, the Indian billionaire who controls Reliance Big Entertainment, Lions Gate Entertainment, Time Warner and Spyglass Entertainment.
However, no one has yet come forward with a credible offer and creditors are preparing to take over the studio next month in a streamlined bankruptcy.
Mr Roy – one of India’s most flamboyant businessmen with strong political contacts and many friends in Mumbai’s glamorous film circle – has been looking for ways to bring Bollywood closer to Hollywood, according to people close to him.
Sahara, which sponsors the national cricket and hockey teams, recently spent a record $370m to buy a cricket team in the Indian Premier League, and was in talks to acquire Liverpool Football Club before it abandoned discussions in August.
The Indian group, controlled by billionaire industrialist Subrata Roy, is prepared to pay up to half of the $3.7bn debt accumulated by the famed US film studio, which owns ‘Gone with the Wind’ and the James Bond series, according to a person familiar with the matter, Sahara would receive an equity stake in the company in return.
Sahara had no official comment on Monday except to confirm that the two companies were in talks. “On mutual interest, discussions are on, but it is too early to comment on the issue,” it said, stressing that the talks were at an early stage.
Shares in Sahara One Media and Entertainment, a listed subsidiary of Sahara India Pariwar, rose as much as 5.49 per cent in early trading on Monday in Mumbai, while the Bombay Stock Exchange’s benchmark Sensex traded up 1.27 per cent.
MGM has been in the hands of its lenders for almost a year after it became unable to service its huge debt, amassed when it was taken over in 2005 by a consortium comprising private equity firms, Sony and Comcast.
Several potential buyers have had their eye on MGM in the past year, including Anil Ambani, the Indian billionaire who controls Reliance Big Entertainment, Lions Gate Entertainment, Time Warner and Spyglass Entertainment.
However, no one has yet come forward with a credible offer and creditors are preparing to take over the studio next month in a streamlined bankruptcy.
Mr Roy – one of India’s most flamboyant businessmen with strong political contacts and many friends in Mumbai’s glamorous film circle – has been looking for ways to bring Bollywood closer to Hollywood, according to people close to him.
Sahara, which sponsors the national cricket and hockey teams, recently spent a record $370m to buy a cricket team in the Indian Premier League, and was in talks to acquire Liverpool Football Club before it abandoned discussions in August.
India's IPOs May Draw More Foreign Investors, Oppenheimer Says
Indian share sales are drawing more interest from overseas investors following a flood of equity issuances by Chinese companies this year, according to Oppenheimer Investments Ltd.
As many as four Indian companies may sell shares in the U.S. in the next 12 months after MakeMyTrip Ltd. became the first Indian IPO in the U.S. since 2006, Chetan Bhatia, managing director of Oppenheimer, said in an interview in Singapore yesterday. Oppenheimer helped manage the $70 million share sale for the Gurgaon, India-based online travel company, whose shares surged 89 percent on the first day of trading last month.
“Indian deals seem to be more palatable to investors right now than some of the Chinese deals,” Bhatia said. “There’s been lots of a heating up of capital there and in part, there’s maybe some flight of capital from China to India.”
Indian companies may raise about $12.3 billion from equity issuances by yearend, lagging behind only China in Asia, according to estimates by Citigroup Inc. A total $116 billion will be raised between now and the end of 2010 from IPOs and other offerings in the region, taking the total this year to a record $291 billion, the brokerage said.
Agricultural Bank of China Ltd., the nation’s largest lender by customers, raised $22.1 billion in a July initial public offering, the world’s largest ever. The shares yesterday closed at 2.6 yuan in Shanghai, below the IPO price of 2.68 yuan and at HK$3.75 in Hong Kong, compared with the HK$3.20 paid by IPO investors.
SouFun
SouFun Holdings Ltd., the operator of China’s biggest property website, surged 73 percent in New York Stock Exchange trading on its Sept. 17 debut. The company raised $125 million selling shares at the top of its price range. At least three other Chinese companies are scheduled to price U.S. IPOs this month, according to data compiled by Bloomberg.
“The conduit from China to the U.S. is much more established,” Oppenheimer’s Bhatia said. Over the next 12 months, about 10 to 15 Chinese companies will sell shares in the U.S., with further capital raising by firms that are already listed, he said.
Oppenheimer is seeking to bring industrial, education and health-care companies from China to the market and is planning deals for Indian infrastructure, medical-related, travel and consumer companies that can benefit from the nation’s economic growth and spending patterns, Bhatia said. He didn’t name specific companies.
As many as four Indian companies may sell shares in the U.S. in the next 12 months after MakeMyTrip Ltd. became the first Indian IPO in the U.S. since 2006, Chetan Bhatia, managing director of Oppenheimer, said in an interview in Singapore yesterday. Oppenheimer helped manage the $70 million share sale for the Gurgaon, India-based online travel company, whose shares surged 89 percent on the first day of trading last month.
“Indian deals seem to be more palatable to investors right now than some of the Chinese deals,” Bhatia said. “There’s been lots of a heating up of capital there and in part, there’s maybe some flight of capital from China to India.”
Indian companies may raise about $12.3 billion from equity issuances by yearend, lagging behind only China in Asia, according to estimates by Citigroup Inc. A total $116 billion will be raised between now and the end of 2010 from IPOs and other offerings in the region, taking the total this year to a record $291 billion, the brokerage said.
Agricultural Bank of China Ltd., the nation’s largest lender by customers, raised $22.1 billion in a July initial public offering, the world’s largest ever. The shares yesterday closed at 2.6 yuan in Shanghai, below the IPO price of 2.68 yuan and at HK$3.75 in Hong Kong, compared with the HK$3.20 paid by IPO investors.
SouFun
SouFun Holdings Ltd., the operator of China’s biggest property website, surged 73 percent in New York Stock Exchange trading on its Sept. 17 debut. The company raised $125 million selling shares at the top of its price range. At least three other Chinese companies are scheduled to price U.S. IPOs this month, according to data compiled by Bloomberg.
“The conduit from China to the U.S. is much more established,” Oppenheimer’s Bhatia said. Over the next 12 months, about 10 to 15 Chinese companies will sell shares in the U.S., with further capital raising by firms that are already listed, he said.
Oppenheimer is seeking to bring industrial, education and health-care companies from China to the market and is planning deals for Indian infrastructure, medical-related, travel and consumer companies that can benefit from the nation’s economic growth and spending patterns, Bhatia said. He didn’t name specific companies.
Sunday, September 19, 2010
Japanese Playing a New Video Game: Catch-Up
CHIBA, Japan — A supersonic hedgehog and a plumber named Mario may have been unlikely heroes, but they once dominated video games. Only the Japanese could make innovative games like those, developers here used to boast. The West just didn’t get it.
Keiji Inafune, head of global research and development at Capcom, says, “Japan is at least five years behind” and “Capcom is barely keeping up.”
Warp ahead 20 years, though, and much of Japan’s game industry is in a rut.
Sonic the Hedgehog and Mario still sell games. But more recent Japanese attempts to establish franchises, like White Knight Chronicles from Sony or Monster Hunter from Capcom, have not made a mark in the United States and Europe. Instead, the blockbuster hits now come from the West: Call of Duty and Guitar Hero from Activision Blizzard, for example, and Grand Theft Auto from Take-Two Interactive.
That is why a growing group of Japanese game developers are asking a once-unthinkable question: can they learn from the West to get back on top of the $60 billion global video game business?
“I look around Tokyo Games Show, and everyone’s making awful games; Japan is at least five years behind,” said Keiji Inafune, 45, head of global research and development at Capcom and one of Japan’s most prominent game designers.
“Capcom is barely keeping up,” he said in an interview at the show, which ended Sunday. “I want to study how Westerners live, and make games that appeal to them.”
From the mid-1980s through the 1990s, most big console-game franchises were born in Japan, including Nintendo’s Mario and Pokémon, Sonic the Hedgehog from Sega and Gran Turismo from Sony.
But the biggest new game franchises of the last decade have been from outside Japan, including Halo by Microsoft, and the hits from Activision Blizzard and Take-Two Interactive.
Last year, the world’s best-selling game by far was Call of Duty: Modern Warfare 2, which sold 11.86 million copies in the United States, Japan and Britain, according to NPD Group, the market research company.
Global sales numbers for the entire industry are hard to come by. But Japan’s share of the world’s video game market, both hardware and software, has fallen to slightly more than 10 percent in 2009, from estimates as high as 50 percent in 2002, based on figures from the Entertainment Software Association, the Japan External Trade Organization, and the research companies DFC Intelligence and Enterbrain.
The West’s dominance was evident here at the Tokyo Game Show, which has lost much of its global clout in recent years. Despite excitement at the 2010 show over coming titles from Japanese publishers, like Ni no Kuni from Level 5 and The Last Guardian from Sony, Japan’s game developers were mainly wringing their hands.
Nintendo has been the major exception, a Japanese game company that has remained dominant. The company, based in Kyoto, reinvented the industry with its Wii home console and wandlike remote, which was introduced in 2006, luring new casual players into the market while setting an industry standard in motion control.
The Wii Sports Resort game was the world’s second-biggest game in 2009, selling 7.57 million copies. Its soon-to-be-released Nintendo 3DS, a portable console with a 3-D display that does not require special glasses, is the industry’s most anticipated hardware release in years.
But because the best-selling games on Nintendo consoles are largely made by Nintendo, the rest of the Japanese game industry has been excluded from that action.
Meanwhile, Japan’s domestic game market is shrinking, down by 20 percent since 2007, to 549 billion yen ($6.4 billion) in 2009, according to Enterbrain.
During that time, the market in the United States surged to a record $21.4 billion in 2008 before a recession-driven decline to $19.7 billion in 2009. But that was still a total increase of 10 percent over two years for the American market, according to NPD.
As Japanese development studios struggle with declining sales, analysts say they are falling behind their American rivals in sheer investment power. A budget for a blockbuster game in the United States can approach $50 million, a figure few Japanese developers can now match.
“Japan used to define gaming,” said Jake Kazdal, a longtime developer who has worked at Sega in Tokyo and the American game publisher Electronic Arts. “But now many developers just do the same thing over and over again.”
Part of Japan’s problem, Mr. Kazdal said, is a growing gap in tastes between players there and overseas. The most popular games in Japan are linear, with little leeway for players to wander off a defined path. In the United States, he said, video games have become more open, virtual experiences.
“Smarter developers in Japan are trying to reach out to the West,” Mr. Kazdal said. “They’re collaborating and trying to make games that have more global appeal.”
But Japanese developers have sometimes hit snags trying to tailor games to Westerners. Take Shadow of Rome, the 2005 action game Capcom made for European and American markets.
Keiji Inafune, head of global research and development at Capcom, says, “Japan is at least five years behind” and “Capcom is barely keeping up.”
Warp ahead 20 years, though, and much of Japan’s game industry is in a rut.
Sonic the Hedgehog and Mario still sell games. But more recent Japanese attempts to establish franchises, like White Knight Chronicles from Sony or Monster Hunter from Capcom, have not made a mark in the United States and Europe. Instead, the blockbuster hits now come from the West: Call of Duty and Guitar Hero from Activision Blizzard, for example, and Grand Theft Auto from Take-Two Interactive.
That is why a growing group of Japanese game developers are asking a once-unthinkable question: can they learn from the West to get back on top of the $60 billion global video game business?
“I look around Tokyo Games Show, and everyone’s making awful games; Japan is at least five years behind,” said Keiji Inafune, 45, head of global research and development at Capcom and one of Japan’s most prominent game designers.
“Capcom is barely keeping up,” he said in an interview at the show, which ended Sunday. “I want to study how Westerners live, and make games that appeal to them.”
From the mid-1980s through the 1990s, most big console-game franchises were born in Japan, including Nintendo’s Mario and Pokémon, Sonic the Hedgehog from Sega and Gran Turismo from Sony.
But the biggest new game franchises of the last decade have been from outside Japan, including Halo by Microsoft, and the hits from Activision Blizzard and Take-Two Interactive.
Last year, the world’s best-selling game by far was Call of Duty: Modern Warfare 2, which sold 11.86 million copies in the United States, Japan and Britain, according to NPD Group, the market research company.
Global sales numbers for the entire industry are hard to come by. But Japan’s share of the world’s video game market, both hardware and software, has fallen to slightly more than 10 percent in 2009, from estimates as high as 50 percent in 2002, based on figures from the Entertainment Software Association, the Japan External Trade Organization, and the research companies DFC Intelligence and Enterbrain.
The West’s dominance was evident here at the Tokyo Game Show, which has lost much of its global clout in recent years. Despite excitement at the 2010 show over coming titles from Japanese publishers, like Ni no Kuni from Level 5 and The Last Guardian from Sony, Japan’s game developers were mainly wringing their hands.
Nintendo has been the major exception, a Japanese game company that has remained dominant. The company, based in Kyoto, reinvented the industry with its Wii home console and wandlike remote, which was introduced in 2006, luring new casual players into the market while setting an industry standard in motion control.
The Wii Sports Resort game was the world’s second-biggest game in 2009, selling 7.57 million copies. Its soon-to-be-released Nintendo 3DS, a portable console with a 3-D display that does not require special glasses, is the industry’s most anticipated hardware release in years.
But because the best-selling games on Nintendo consoles are largely made by Nintendo, the rest of the Japanese game industry has been excluded from that action.
Meanwhile, Japan’s domestic game market is shrinking, down by 20 percent since 2007, to 549 billion yen ($6.4 billion) in 2009, according to Enterbrain.
During that time, the market in the United States surged to a record $21.4 billion in 2008 before a recession-driven decline to $19.7 billion in 2009. But that was still a total increase of 10 percent over two years for the American market, according to NPD.
As Japanese development studios struggle with declining sales, analysts say they are falling behind their American rivals in sheer investment power. A budget for a blockbuster game in the United States can approach $50 million, a figure few Japanese developers can now match.
“Japan used to define gaming,” said Jake Kazdal, a longtime developer who has worked at Sega in Tokyo and the American game publisher Electronic Arts. “But now many developers just do the same thing over and over again.”
Part of Japan’s problem, Mr. Kazdal said, is a growing gap in tastes between players there and overseas. The most popular games in Japan are linear, with little leeway for players to wander off a defined path. In the United States, he said, video games have become more open, virtual experiences.
“Smarter developers in Japan are trying to reach out to the West,” Mr. Kazdal said. “They’re collaborating and trying to make games that have more global appeal.”
But Japanese developers have sometimes hit snags trying to tailor games to Westerners. Take Shadow of Rome, the 2005 action game Capcom made for European and American markets.
Banks Seeking Most Cash Since July Drive Up Borrowing Costs: India Credit
Banks in India are increasing borrowing from the central bank to the most since July as a shortage of cash drives short-term interest rates higher.
Financial institutions borrowed a daily average of 294 billion rupees ($6.4 billion) last week, after depositing 69 billion a day in the previous week, Reserve Bank of India data show. Overnight lending rates climbed to a six-month high of 6.10 percent on Sept. 17, from 5.25 percent a week earlier, as companies pay taxes this month and people withdraw cash ahead of religious holidays. That was the biggest jump since the period ended June 5.
Banks have borrowed more than they deposited with the monetary authority for four straight months, the longest stretch since the collapse of Lehman Brothers Holdings Inc., as Governor Duvvuri Subbarao reins in money-supply growth to help cool inflation in the world’s second-most populous nation. Subbarao increased interest rates for the fifth time this year last week, sending yields on 10-year Indian bonds toward a two-year high, above those of China and Russia and below those of Brazil.
“Until inflation begins to dissipate, the central bank may continue to keep cash conditions tight,” Abheek Barua, chief economist in New Delhi at HDFC Bank Ltd., India’s third largest, said in a Sept. 16 interview. “The RBI has a plethora of policy options to ease liquidity including easing reserve requirements and raising foreign investment limit on debt, but they are deliberately keeping it tight.”
Subbarao is concerned that higher rates have failed to stop record lending. He is trying to slow inflation, which surged to 11 percent in April before slowing to 8.5 percent in August, as measured by wholesale prices. The Reserve Bank is still worried by the pace of price increases, Deputy Governor Subir Gokarn said in an e-mailed statement in New Delhi on Sept. 17.
Inflation, Lending
Loans to companies including Essar Steel Ltd. and Videocon Industries Ltd. climbed 36 percent to 2.1 trillion rupees this year, the most since Bloomberg started compiling the data in 2002. State Bank of India and ICICI Bank Ltd., the nation’s two biggest, have raised their lending rates by 0.5 percentage point this year, less than the 1.25 percentage-point increase in the central bank’s benchmark repurchase rate.
India’s banks may push up their rates by 50 to 100 basis points by December, helping bring down inflation to about 5.5 percent by the end of 2010, said HDFC’s Barua.
Last week’s borrowing by banks was the most since they sought an average 642 billion rupees a day in the week ended July 23, central bank data show. Indian companies withdrew funds before the Sept. 15 deadline to pay corporate tax. Consumers may also tap savings before the Hindu festivals of Dussehra in October and Diwali in November.
The last time banks were net borrowers for four consecutive months was between May and November in 2008, as the global financial crisis deepened.
Yields Rise
The cash reserve ratio, the proportion of deposits lenders should keep with the central bank, was last increased by 0.25 percentage point to 6 percent on April 26. International holdings of India’s rupee debt climbed 120 percent this year to $16.6 billion as of Sept. 16, approaching the $20 billion limit, according to data from the Securities & Exchange Board of India.
The yield on India’s benchmark 10-year bond rose 7 basis points, or 0.07 percentage point, last week to 7.98 percent. While the rate has climbed 39 basis points in 2010, it has slid 14 basis points from a high of 8.12 percent on April 27. Similar- maturity bonds yield 3.23 percent in China, 7.56 percent in Russia and 11.83 percent in Brazil.
The difference in yields between the debt and similar- maturity U.S. Treasuries widened to 5.25 percentage points on Sept. 17 from 5.10 percentage point a week earlier. This compares with an average 3.17 points in the past decade. The measure peaked at 5.56 points on Aug. 26.
Worst Performers
Returns from Indian government bonds fell 0.25 percent this month, losing the most after Singapore and Hong Kong among 10 local-currency debt markets outside Japan, according to indexes compiled by London-based HSBC Holdings Plc, Europe’s largest bank. The notes returned 3 percent this year, the worst performance in the region excluding Japan.
The cost of fixing rates on money for three years in the market for so-called interest-rate swaps, climbed 25 basis points last week to 6.77 percent, data compiled by Bloomberg show. It had dropped 42 basis points in the previous six weeks.
In raising rates, the Indian central bank “suggested that the path of policy normalization was over, which we interpret as signaling a long pause,” Piero Ghezzi, the global head of foreign-exchange strategy at Barclays Capital in London, wrote in a Sept. 17 report.
The rupee appreciated 1.4 percent last week to 45.845 per dollar, the most since the five-day period ended June 18, as the benchmark Sensitive Index of shares surged 4.2 percent.
Subbarao may seek more curbs on credit in November, including tighter rules for loans to property developers, said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd., a lender part owned by Rabobank Nederland NV and HSBC.
“The RBI is making sure that liquidity stays tight,” Ramit Bhasin, the Mumbai-based head of markets in India at Royal Bank of Scotland NV, said in a Sept. 17 interview.
Financial institutions borrowed a daily average of 294 billion rupees ($6.4 billion) last week, after depositing 69 billion a day in the previous week, Reserve Bank of India data show. Overnight lending rates climbed to a six-month high of 6.10 percent on Sept. 17, from 5.25 percent a week earlier, as companies pay taxes this month and people withdraw cash ahead of religious holidays. That was the biggest jump since the period ended June 5.
Banks have borrowed more than they deposited with the monetary authority for four straight months, the longest stretch since the collapse of Lehman Brothers Holdings Inc., as Governor Duvvuri Subbarao reins in money-supply growth to help cool inflation in the world’s second-most populous nation. Subbarao increased interest rates for the fifth time this year last week, sending yields on 10-year Indian bonds toward a two-year high, above those of China and Russia and below those of Brazil.
“Until inflation begins to dissipate, the central bank may continue to keep cash conditions tight,” Abheek Barua, chief economist in New Delhi at HDFC Bank Ltd., India’s third largest, said in a Sept. 16 interview. “The RBI has a plethora of policy options to ease liquidity including easing reserve requirements and raising foreign investment limit on debt, but they are deliberately keeping it tight.”
Subbarao is concerned that higher rates have failed to stop record lending. He is trying to slow inflation, which surged to 11 percent in April before slowing to 8.5 percent in August, as measured by wholesale prices. The Reserve Bank is still worried by the pace of price increases, Deputy Governor Subir Gokarn said in an e-mailed statement in New Delhi on Sept. 17.
Inflation, Lending
Loans to companies including Essar Steel Ltd. and Videocon Industries Ltd. climbed 36 percent to 2.1 trillion rupees this year, the most since Bloomberg started compiling the data in 2002. State Bank of India and ICICI Bank Ltd., the nation’s two biggest, have raised their lending rates by 0.5 percentage point this year, less than the 1.25 percentage-point increase in the central bank’s benchmark repurchase rate.
India’s banks may push up their rates by 50 to 100 basis points by December, helping bring down inflation to about 5.5 percent by the end of 2010, said HDFC’s Barua.
Last week’s borrowing by banks was the most since they sought an average 642 billion rupees a day in the week ended July 23, central bank data show. Indian companies withdrew funds before the Sept. 15 deadline to pay corporate tax. Consumers may also tap savings before the Hindu festivals of Dussehra in October and Diwali in November.
The last time banks were net borrowers for four consecutive months was between May and November in 2008, as the global financial crisis deepened.
Yields Rise
The cash reserve ratio, the proportion of deposits lenders should keep with the central bank, was last increased by 0.25 percentage point to 6 percent on April 26. International holdings of India’s rupee debt climbed 120 percent this year to $16.6 billion as of Sept. 16, approaching the $20 billion limit, according to data from the Securities & Exchange Board of India.
The yield on India’s benchmark 10-year bond rose 7 basis points, or 0.07 percentage point, last week to 7.98 percent. While the rate has climbed 39 basis points in 2010, it has slid 14 basis points from a high of 8.12 percent on April 27. Similar- maturity bonds yield 3.23 percent in China, 7.56 percent in Russia and 11.83 percent in Brazil.
The difference in yields between the debt and similar- maturity U.S. Treasuries widened to 5.25 percentage points on Sept. 17 from 5.10 percentage point a week earlier. This compares with an average 3.17 points in the past decade. The measure peaked at 5.56 points on Aug. 26.
Worst Performers
Returns from Indian government bonds fell 0.25 percent this month, losing the most after Singapore and Hong Kong among 10 local-currency debt markets outside Japan, according to indexes compiled by London-based HSBC Holdings Plc, Europe’s largest bank. The notes returned 3 percent this year, the worst performance in the region excluding Japan.
The cost of fixing rates on money for three years in the market for so-called interest-rate swaps, climbed 25 basis points last week to 6.77 percent, data compiled by Bloomberg show. It had dropped 42 basis points in the previous six weeks.
In raising rates, the Indian central bank “suggested that the path of policy normalization was over, which we interpret as signaling a long pause,” Piero Ghezzi, the global head of foreign-exchange strategy at Barclays Capital in London, wrote in a Sept. 17 report.
The rupee appreciated 1.4 percent last week to 45.845 per dollar, the most since the five-day period ended June 18, as the benchmark Sensitive Index of shares surged 4.2 percent.
Subbarao may seek more curbs on credit in November, including tighter rules for loans to property developers, said Shubhada Rao, Mumbai-based chief economist at Yes Bank Ltd., a lender part owned by Rabobank Nederland NV and HSBC.
“The RBI is making sure that liquidity stays tight,” Ramit Bhasin, the Mumbai-based head of markets in India at Royal Bank of Scotland NV, said in a Sept. 17 interview.
Gunmen attack tourist bus in New Delhi
India’s security arrangements for next month’s Commonwealth Games came under renewed scrutiny on Sunday, after gunmen fired on a tourist bus outside a New Delhi mosque, wounding two Taiwanese visitors.
The pair of motor-bike riding gunmen shot at a group of Taiwanese visitors outside the vast Jama Masjid, Delhi’s most important Islamic site, and a popular tourist attraction in the city’s congested old quarter.
Police, hunting for the culprits, said they did not yet know the motive, and could not comment on whether the assault was linked to the many terror attacks that have rocked New Delhi and other Indian cities in recent years.
New Delhi’s chief minister, Sheila Dixit, urged calm, even as the city was put on high alert. “I appeal to everybody, please do not panic,” Ms Dixit said. “An incident like this is something worrying but nothing to panic about.”
But with the start of the Commonwealth Games just two weeks away, the shooting has reignited concern over whether India – still haunted by the devastating Mumbai terror attack of two years ago- is ready to provide adequate security for visiting athletes and spectators.
“Even if it just a totally random, one-off incident, you would expect that if people are just turning up in Delhi, their antennae are going to be fluttering around this issue,” said one Commonwealth diplomat.
The BBC said on Sunday it had received an e-mail from an Islamist group, the Indian Mujahideen, in which it warned of attacks during the games, which will further fuel security concerns.
India faces a high risk of terror attacks from groups like the Pakistan-based Lashkar e-Taiba, the force behind attacks in Mumbai in November 2008, during which 131 people were killed, and hundreds more injured, at two five-star hotels and the city’s main railway station.
The US State Department said in an advisory this month it had no intelligence of any specific threat to the Commonwealth games, but has warned of the high, continuing threat of terrorism across the country.
Security experts fear the sports tournament– which will draw athletes and spectators from 55 Commonwealth countries - could be a tempting target for radical groups.
MS Gill, the sports minister, said last week that security would be “not just 100 per cent but 120 per cent foolproof,” with at least 100,000 security personal deployed to safeguard the event. New Delhi has already stepped up its police presence across New Delhi, with advance teams for the games already arriving.
However, Sunday’s shooting will draw renewed attention to the security at sites that are not games venues, but could draw foreign visitors during the competition. “Lots of security measures have already been taken,” said Ms Dixit. “Whereever there is an inadequacy about it, that hole has to be plugged.”
The shooting is the latest jolt to Delhi’s efforts to stage the games, which have also been plagued by long delays in completing venues, allegations of corruption and an epidemic of mosquito-born dengue fever, which is expected to peak next month.
The pair of motor-bike riding gunmen shot at a group of Taiwanese visitors outside the vast Jama Masjid, Delhi’s most important Islamic site, and a popular tourist attraction in the city’s congested old quarter.
Police, hunting for the culprits, said they did not yet know the motive, and could not comment on whether the assault was linked to the many terror attacks that have rocked New Delhi and other Indian cities in recent years.
New Delhi’s chief minister, Sheila Dixit, urged calm, even as the city was put on high alert. “I appeal to everybody, please do not panic,” Ms Dixit said. “An incident like this is something worrying but nothing to panic about.”
But with the start of the Commonwealth Games just two weeks away, the shooting has reignited concern over whether India – still haunted by the devastating Mumbai terror attack of two years ago- is ready to provide adequate security for visiting athletes and spectators.
“Even if it just a totally random, one-off incident, you would expect that if people are just turning up in Delhi, their antennae are going to be fluttering around this issue,” said one Commonwealth diplomat.
The BBC said on Sunday it had received an e-mail from an Islamist group, the Indian Mujahideen, in which it warned of attacks during the games, which will further fuel security concerns.
India faces a high risk of terror attacks from groups like the Pakistan-based Lashkar e-Taiba, the force behind attacks in Mumbai in November 2008, during which 131 people were killed, and hundreds more injured, at two five-star hotels and the city’s main railway station.
The US State Department said in an advisory this month it had no intelligence of any specific threat to the Commonwealth games, but has warned of the high, continuing threat of terrorism across the country.
Security experts fear the sports tournament– which will draw athletes and spectators from 55 Commonwealth countries - could be a tempting target for radical groups.
MS Gill, the sports minister, said last week that security would be “not just 100 per cent but 120 per cent foolproof,” with at least 100,000 security personal deployed to safeguard the event. New Delhi has already stepped up its police presence across New Delhi, with advance teams for the games already arriving.
However, Sunday’s shooting will draw renewed attention to the security at sites that are not games venues, but could draw foreign visitors during the competition. “Lots of security measures have already been taken,” said Ms Dixit. “Whereever there is an inadequacy about it, that hole has to be plugged.”
The shooting is the latest jolt to Delhi’s efforts to stage the games, which have also been plagued by long delays in completing venues, allegations of corruption and an epidemic of mosquito-born dengue fever, which is expected to peak next month.
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