A Gandhian experiment with community-owned companies
is not just a flourishing retail enterprise in India,
but a model for all kinds of companies in the developing world
This year Fabindia turns fifty. Founded in 1960 by John Bissell, an American working with the Ford Foundation in New Delhi, as an export house to market Indian handloom textiles, Fabindia is now also a leading lifestyle retail brand with 115 stores in big cities and small towns across India, and overseas.
Yet more than its spectacular growth, which has turned Fabindia into a household name, its unique business model has evoked awe and admiration, not to mention a Harvard Business School case study as well. Though by no means the only business founded on the balance between commercial profit and social commitment, Fabindia is certainly among the most successful. In 2008 it registered revenues of Rs 250 million, an increase of 30 per cent over the previous year, and certainly a long, long way from the Rs 0.9 million that Bissell used as seed capital when he started out.
Fabindia’s business philosophy was summed up by Bissell as: “In addition to making profits, our aims are constant development of new hand-woven products, a fair, equitable and helpful relationship with our producers, and the maintenance of quality on which our reputation rests.”
Bissell’s vision translates as a kind of inclusive capitalism, linking over 40,000 craft-based rural producers, primarily weavers, block printers, woodworkers and organic farmers, to modern urban markets through its “community owned companies” which act as value adding intermediaries, between them and Fabindia. These companies are owned, as the name suggests, by the communities they operate from; a minimum 26% shareholding of these companies is that of craft persons. The ownership structure is mutually beneficial for Fabindia and the artisans, with the retailer ensuring it has the supplies it needs while the artisans are assured a steady income. The model Fabindia has, in the process, developed and nurtured a base for skilled, sustainable rural employment, and preserving India's traditional handicrafts in the process.
For all its success, Fabindia continues to try and resist the temptation of going “mainstream”, content to develop and widen the niche segment where its presence is formidable. This belief is being put to test, as John Bissell’s son, William, who took over after Bissell’s death in 1999, plans to open 150 more stores in the next four years! How Bissell overcomes the natural constraints of his unique business model while maintaining the scorching pace of expansion is what the business world is waiting to find out.
Given Fabindia’s track record and adherence to principles of quality, fair pricing, customer satisfaction and, above all, commitment to provide employment to thousands of v illage weavers and artisans, the answer is a no-brainer! In the intensely competitive retail sector, Fabindia’s unique business values have helped not just shaped the way the Indian middle class dress and furnish their homes, but set a high standard of vision, innovation and social commitment.
13-03-2011
Saturday, March 12, 2011
Design for Inclusive Development
Design for Inclusive Development
Prof M P Ranjan, Design Thinker & Independent Academic,
writes about the role of design in inclusive development in India.
Our economists and planners have got used to the idea of measuring progress by the growth and their metrics include industrial production, agricultural production and the growth of money itself in the system along with the notional value of a host of financial instruments and derivatives that reside in the digital space. Politicians have not been told that there could be other ways to measure progress and if they have the theory of economics is very sparse in this area. Design education and innovation in India too has languished in the shade of scientific and technological investments (S&T). The deep- seated belief in the Planning Commission and the Political establishment, both in Government and in the Opposition, is that huge investments in science and technology combined with private entrepreneurship and the profit motive will somehow solve the problems of inclusive growth that is beleaguering the Indian economy. This is a consensus that has played itself out in the IT & software revolution in the Silicon Valley and more money is placed in the S&T kitty but the problems seem to grow, nevertheless. The huge gap between the haves and the have-nots grow by the day and the promises that are held out by the advocates of innovation investments in S&T behold a hot social and political time bomb waiting to explode in all our faces. The other approach is more direct, that of providing direct subsidies through political appeasement that is resorted to by Central and State Governments using pre-poll promises and politically mediated grants and aid that are dished out to the poverty ridden folks through direct action primarily to nurture a vote bank. Unfortunately, here too the delivery system is so porous and corruption so rampant through our society that it permeates the system all the way through the supply chain, leaving a very unsatisfied public that is simmering at the fringes, both urban and rural, all over the country. Our corporate bodies too are no better at addressing these needs with all the disclosures that
are coming out in the media on a daily basis these days.
The result of all these plans and actions is the grave political and social unrest that is facing us in the form of a very angry citizen near the bottom of the pyramid who can for the first time see the lives of the other affluent sections and the growing middle class played out in full colour in daily broadcasts of the television channels and the open access through the internet in an age of heightened communication. Charles & Ray Eames had warned us about this impending impact of such disruptive change through extended communication, a change in kind and not in degree they said, in their 1958 India Report and we have not paid heed to this sanguine advice. He had called for the use of design to address the needs and aspirations of a people in the throes of such change but we have perhaps let slip an advantage by not channeling adequate investments to address their dreams and aspirations in close partnership with the people directly. Innovation at the grassroots has become a buzzword in management circles and here the case studies that are celebrated fall into the category of Jugaad (creative make-shift) and not of Design (intentional and sensitive configurations) as we would argue that it should be. Jugaad stands for the creative interpretation of severe limitations and shortages to produce a workable contraption or scheme held together by available opportunity, hope and hard work, always at a fraction of the cost that would otherwise have been available, with most of the action lying in the unregulated space of zero taxation and technical specifications, in many cases illegal. So the celebration is in the extreme cost cutting that has been achieved by the poverty ridden creator and service provider and the rest of us stand in mute respect for the heroic achievement, the response of the poor or a clever service provider to an impossible situation, a sheer act of survival. Unfortunately, Jugaad also fosters a Chalta-hai (make-do) attitude that permeates all our offerings from Government services to low cost infrastructure, products and service solutions that are not sustainable for inclusive development, all lacking in refinement and costly in the long run, creating the platform for a low quality sub-culture far from the rich tapestry of traditional wisdom that are at the very foundation of the Indian society that has somehow survived till date. However is this the only way? Is there another way?
The communication boom and an era of transparency have ensured that the Indian consumers are no longer willing to accept the mediocre when better value is available. For example, in many parts of India the poor have shunned incompetent public education systems to place their child in expensive private schools and in going the extra mile to avail quality where it is on offer, a new phenomenon for both urban and rural India that is communication enabled. However, the design establishment in the country has languished in the face of great apathy from both Government and industry during an extended period of a highly regulated and centrally managed economy and the absence of any real competition. Design schools like the National Institute of Design have suffered from an absence of both funding and vision in recent years and the National Design Policy of 2007 too has a very limited mandate which does not include the huge opportunities that exist for local investments in innovation and design for inclusive development. It stops short of harping on slogans and on the export and luxury product industries as their area of focus. Further, on the education front while several new NID’s are proposed to be funded by Government there is an absence of any new vision statement as to their focus and purpose as if the model exemplified by NID Ahmedabad could be used as a clone for the creation of these new centres in four geographical regions of India, a missed opportunity to address the change that is taking place in our country. The India Design Council, another outcome of the National Design Policy is harping on “Good Design” as a quality benchmark which is product of Western Industry and their consumer marketing focus that is least suited to evaluate design solutions for inclusive development that is now needed in India.
No international design solutions are available that are ready and off the shelf to address the pressing problems of the Indian people such as affordable healthcare, rural and urban sanitation, dispersed quality education at the primary and secondary levels, agricultural and rural tools, rural housing and mobility and a host of other design opportunities across 230 sectors of our economy that are in crying need of design attention. These will have to be addressed locally and innovation and design will be the way forward but the infrastructure for action is not in place since the existing institutes are barking up the wrong tree it seems. The Eames Report and the National Institute of Design in the early years innovated an unique education programme in design that was addressing these very issues but over the last ten years these advances in design education and research were systematically demolished by literally throwing the baby out with the bathwater in their misguided effort to get university status and in the search for qualification rather than content and relevance. The DIPP, the department in Government that handles the NID budgets and the National Design Policy has proved to be patently incompetent to support the design movement in the country and to move it in directions that it needs to be taken if it to be relevant to the creation of a platform for inclusive development. Perhaps their limited mandate to address the needs of Indian industry has made them myopic to the larger roles that design has to play if it to be relevant to our national agenda. Design is not a mere hand-maiden for industrial development but a much broader strategy that can help transform society and feed into the culture forming processes of a country and a region. The evidence of this incompetence is visible in the poor quality of vision and funding that is provided to the NID when compared to the IITs and IIMs, both of which were set up around the same time in the early 60’s. The National Institutes of Fashion Technology (NIFT) was set up in the late 80’s through the Textile Ministry and they used a special export cess that was accumulated with Government to rapidly fund the establishment and growth of a huge national infrastructure that is now recognised as a university of national importance. Further, NID’s faculty are a poorly remunerated lot when compared to their counterparts in any comparable institute or university in India and this I am sure will ensure that the best will veer away from committing themselves to pressing design education roles that are facing the nation today. Perhaps the correct way out of this messy situation is to move the NID’s to a new ministry that is capable of addressing the multi-facetted roles of design action that are needed in India across all verticals and all ministries. My students once proposed a structure and they called for the creation of the Ministry of Design, perhaps as part of the Prime Ministers Office till it can move to the area of Culture where it could find a niche that is appropriate to address the emerging challenges of quality and relevance to society.
When I reflect on the various projects done at the NID in the early years from the Electronic Voting Machine to the Jawaja project, through the Chennapatna toy project to numerous textile design projects such as the Dhamadka Block Print project a number of design strategies come to mind. We need to ponder deeply on many of these real world design experiences to cull out lessons that can take us forward to a socially and culturally appropriate application of design action that could bring great value to our population. More recently, our initiatives in Tripura State through the “Katlamara Chalo” project integrates bamboo cultivation with product manufacturing as a means to alleviate rural poverty using local skills, resources and local enthusiasm as the primary resource. We were able to discuss design and develop strategies for the bottom of the pyramid with colleagues at the Indian Institute of Crafts and Design, Jaipur, an initiative of the Government of Rajasthan that is now being managed under a public- private partnership and here we built a more generalized sketch model called “Raindrops and Footprints” that explained the process leading to the selection of the village through local intensive research and the building of an understanding of the local context from which a number of design opportunities are identified and modeled before they are taken through a participatory development process which used the local strengths and resources in a sustainable manner. Here design is not just looking at “Good Form” but at the strategies and approaches along the entire supply chain and at each stage value is unfolded. The attempt was to find local solutions suitable for local application using our macro-micro strategy for design action that are informed by serious research and sustained contact with the beneficiaries through hand-holding and educational contact in the field. This integrated strategy has paid off but the investment of time and effort is considerable to prototype and test such a strategy to be rolled out to various locations using available local resources as the platform for sustainable change. For the first time in India we have a rural community using farm based bamboo to drive a local industry towards self reliance and managed growth. Starting with bamboo products and furniture we see the sustained action providing an uninterrupted supply of raw materials and skill sets that can foster the growth of a decentralized, local and self governed economy that could survive and thrive in the emerging era that I call the “Post industrial and Post-mining era”.
This is a new form of design action not to be confused with the form giving activity of traditional industrial design, although it would include elements from the old form of design thought and action. Here we are proposing that the design action take into account the structure of society along with their macro aspirations, their histories and cultural preferences as a starting point and from here build imaginative approaches for products, services and systems that would include the meta-system, the infrastructure, the hardware, the software and the processware to ensure a perfect fit to the circumstances and requirements of the particular situation. This kind of offering is complex and would need a multitude of knowledge and skill sets to be brought to bear with sensitive social and cultural orientation and with a fine tuned economic and technical feasibility. Design for inclusive development is therefore a multi-disciplinary activity that needs to draw a variety of knowledge and skills in an innovative and future oriented setting that is well informed about the legal and the ethical parameters. In this form it becomes a powerful political activity since it is propositional in the manner in which it visualizes and realizable alternatives for the stakeholders from which the process of selection and decision can begin. It is a democratic activity at the very heart and gives power to the people who are at the location and to those who would be most impacted by its implementation. This shift in design thinking can be better understood through the model that I have proposed that explains the three orders of design – Form, Structure and System – material & functional, aesthetic & socio- economic, environmental and political – all of which need to be addressed in all cases if we are to be assured of its sustainability and relevance to the local context. Under these terms of reference industry and business must take responsibility for end to end offer of service and not just for the delivery of brands and boxes that contain a “Good Design” product but ensure that they serve the purpose that was promised in the first place.
I do believe that design can help here and we may need to make some fundamental changes in our design education approaches and widen the base for action, a shift from a focus on business and industry to the design for public good that is operational at the local community level. These should include the grassroots workers in the design education loop and the content of such education needs to be informed by design insights that are local and rooted in the local reality for which our current crop of textbooks would be found wanting. This will need fresh approaches and enlightened support from the political establishment if these changes are to be forged. I do feel that we need to raise this debate and explore the various roles of design and its potential application that is today ignored by design education and practice alike, including my own school if I may admit here, so that a new sense of commitment is brought into the use of design in areas far outside industry and business. This is one of my mission objectives for setting up the 'Design for India" blog to help create a platform from which I can share my thoughts on the possibilities that I see in my minds eye. I also find the peer review system of the research publications as not so perfect for the dissemination of design insights although it does work wonders for science analysis and knowledge creation but it may be extremely defective for design demonstration since the idea of “design opportunity”, a very specific term – a combination of perception and imagination – excludes the viewer or reader from "seeing" the imagination part of the designers statement and therefore it compels the designer to take the idea far down the visualisation and realization path before it can even dawn on others that the idea is truly credible. This means that we may need to create a platform or even a multitude of platforms for design incubation and development that can be accessible to many across numerous areas of application and these kinds of platforms just do not exist in India today, or if it does, it is dominated by centralized administrative controls that stifle innovation and exploration which is critically needed to make the demonstration. Our policies for faculty research and action need to be liberal and this needs substantial change and autonomy for the ‘Maverick innovator” with good intentions and value systems in place to do their innovative work. Some of us have had to battle hard to achieve even a small degree of autonomy of action and this is not a good climate for addressing these complex problems which surround us here in India in an effective manner. We need new institutions and whole new mind set to address these complex issues at hand.
How do we create such autonomous and decentralized action strategies and how do we roll this out across our Universities and Institutes of design action? This will be one of the central questions that can change the current impasse in development approaches dealing with poverty in many parts of India. There are no simple answers but we will need to look deeply at our experiences in the field and build new institutes and strategies that can use the promise of design to find approaches to address these complex needs. The current conviction that we hold is the use of a macro-micro design strategy which has been developed after years of application and we need to do more before we can spread this deep conviction that we hold to others who hold the purse string in our countries where real action is needed today.
13-03-2011
Prof M P Ranjan, Design Thinker & Independent Academic,
writes about the role of design in inclusive development in India.
Our economists and planners have got used to the idea of measuring progress by the growth and their metrics include industrial production, agricultural production and the growth of money itself in the system along with the notional value of a host of financial instruments and derivatives that reside in the digital space. Politicians have not been told that there could be other ways to measure progress and if they have the theory of economics is very sparse in this area. Design education and innovation in India too has languished in the shade of scientific and technological investments (S&T). The deep- seated belief in the Planning Commission and the Political establishment, both in Government and in the Opposition, is that huge investments in science and technology combined with private entrepreneurship and the profit motive will somehow solve the problems of inclusive growth that is beleaguering the Indian economy. This is a consensus that has played itself out in the IT & software revolution in the Silicon Valley and more money is placed in the S&T kitty but the problems seem to grow, nevertheless. The huge gap between the haves and the have-nots grow by the day and the promises that are held out by the advocates of innovation investments in S&T behold a hot social and political time bomb waiting to explode in all our faces. The other approach is more direct, that of providing direct subsidies through political appeasement that is resorted to by Central and State Governments using pre-poll promises and politically mediated grants and aid that are dished out to the poverty ridden folks through direct action primarily to nurture a vote bank. Unfortunately, here too the delivery system is so porous and corruption so rampant through our society that it permeates the system all the way through the supply chain, leaving a very unsatisfied public that is simmering at the fringes, both urban and rural, all over the country. Our corporate bodies too are no better at addressing these needs with all the disclosures that
are coming out in the media on a daily basis these days.
The result of all these plans and actions is the grave political and social unrest that is facing us in the form of a very angry citizen near the bottom of the pyramid who can for the first time see the lives of the other affluent sections and the growing middle class played out in full colour in daily broadcasts of the television channels and the open access through the internet in an age of heightened communication. Charles & Ray Eames had warned us about this impending impact of such disruptive change through extended communication, a change in kind and not in degree they said, in their 1958 India Report and we have not paid heed to this sanguine advice. He had called for the use of design to address the needs and aspirations of a people in the throes of such change but we have perhaps let slip an advantage by not channeling adequate investments to address their dreams and aspirations in close partnership with the people directly. Innovation at the grassroots has become a buzzword in management circles and here the case studies that are celebrated fall into the category of Jugaad (creative make-shift) and not of Design (intentional and sensitive configurations) as we would argue that it should be. Jugaad stands for the creative interpretation of severe limitations and shortages to produce a workable contraption or scheme held together by available opportunity, hope and hard work, always at a fraction of the cost that would otherwise have been available, with most of the action lying in the unregulated space of zero taxation and technical specifications, in many cases illegal. So the celebration is in the extreme cost cutting that has been achieved by the poverty ridden creator and service provider and the rest of us stand in mute respect for the heroic achievement, the response of the poor or a clever service provider to an impossible situation, a sheer act of survival. Unfortunately, Jugaad also fosters a Chalta-hai (make-do) attitude that permeates all our offerings from Government services to low cost infrastructure, products and service solutions that are not sustainable for inclusive development, all lacking in refinement and costly in the long run, creating the platform for a low quality sub-culture far from the rich tapestry of traditional wisdom that are at the very foundation of the Indian society that has somehow survived till date. However is this the only way? Is there another way?
The communication boom and an era of transparency have ensured that the Indian consumers are no longer willing to accept the mediocre when better value is available. For example, in many parts of India the poor have shunned incompetent public education systems to place their child in expensive private schools and in going the extra mile to avail quality where it is on offer, a new phenomenon for both urban and rural India that is communication enabled. However, the design establishment in the country has languished in the face of great apathy from both Government and industry during an extended period of a highly regulated and centrally managed economy and the absence of any real competition. Design schools like the National Institute of Design have suffered from an absence of both funding and vision in recent years and the National Design Policy of 2007 too has a very limited mandate which does not include the huge opportunities that exist for local investments in innovation and design for inclusive development. It stops short of harping on slogans and on the export and luxury product industries as their area of focus. Further, on the education front while several new NID’s are proposed to be funded by Government there is an absence of any new vision statement as to their focus and purpose as if the model exemplified by NID Ahmedabad could be used as a clone for the creation of these new centres in four geographical regions of India, a missed opportunity to address the change that is taking place in our country. The India Design Council, another outcome of the National Design Policy is harping on “Good Design” as a quality benchmark which is product of Western Industry and their consumer marketing focus that is least suited to evaluate design solutions for inclusive development that is now needed in India.
No international design solutions are available that are ready and off the shelf to address the pressing problems of the Indian people such as affordable healthcare, rural and urban sanitation, dispersed quality education at the primary and secondary levels, agricultural and rural tools, rural housing and mobility and a host of other design opportunities across 230 sectors of our economy that are in crying need of design attention. These will have to be addressed locally and innovation and design will be the way forward but the infrastructure for action is not in place since the existing institutes are barking up the wrong tree it seems. The Eames Report and the National Institute of Design in the early years innovated an unique education programme in design that was addressing these very issues but over the last ten years these advances in design education and research were systematically demolished by literally throwing the baby out with the bathwater in their misguided effort to get university status and in the search for qualification rather than content and relevance. The DIPP, the department in Government that handles the NID budgets and the National Design Policy has proved to be patently incompetent to support the design movement in the country and to move it in directions that it needs to be taken if it to be relevant to the creation of a platform for inclusive development. Perhaps their limited mandate to address the needs of Indian industry has made them myopic to the larger roles that design has to play if it to be relevant to our national agenda. Design is not a mere hand-maiden for industrial development but a much broader strategy that can help transform society and feed into the culture forming processes of a country and a region. The evidence of this incompetence is visible in the poor quality of vision and funding that is provided to the NID when compared to the IITs and IIMs, both of which were set up around the same time in the early 60’s. The National Institutes of Fashion Technology (NIFT) was set up in the late 80’s through the Textile Ministry and they used a special export cess that was accumulated with Government to rapidly fund the establishment and growth of a huge national infrastructure that is now recognised as a university of national importance. Further, NID’s faculty are a poorly remunerated lot when compared to their counterparts in any comparable institute or university in India and this I am sure will ensure that the best will veer away from committing themselves to pressing design education roles that are facing the nation today. Perhaps the correct way out of this messy situation is to move the NID’s to a new ministry that is capable of addressing the multi-facetted roles of design action that are needed in India across all verticals and all ministries. My students once proposed a structure and they called for the creation of the Ministry of Design, perhaps as part of the Prime Ministers Office till it can move to the area of Culture where it could find a niche that is appropriate to address the emerging challenges of quality and relevance to society.
When I reflect on the various projects done at the NID in the early years from the Electronic Voting Machine to the Jawaja project, through the Chennapatna toy project to numerous textile design projects such as the Dhamadka Block Print project a number of design strategies come to mind. We need to ponder deeply on many of these real world design experiences to cull out lessons that can take us forward to a socially and culturally appropriate application of design action that could bring great value to our population. More recently, our initiatives in Tripura State through the “Katlamara Chalo” project integrates bamboo cultivation with product manufacturing as a means to alleviate rural poverty using local skills, resources and local enthusiasm as the primary resource. We were able to discuss design and develop strategies for the bottom of the pyramid with colleagues at the Indian Institute of Crafts and Design, Jaipur, an initiative of the Government of Rajasthan that is now being managed under a public- private partnership and here we built a more generalized sketch model called “Raindrops and Footprints” that explained the process leading to the selection of the village through local intensive research and the building of an understanding of the local context from which a number of design opportunities are identified and modeled before they are taken through a participatory development process which used the local strengths and resources in a sustainable manner. Here design is not just looking at “Good Form” but at the strategies and approaches along the entire supply chain and at each stage value is unfolded. The attempt was to find local solutions suitable for local application using our macro-micro strategy for design action that are informed by serious research and sustained contact with the beneficiaries through hand-holding and educational contact in the field. This integrated strategy has paid off but the investment of time and effort is considerable to prototype and test such a strategy to be rolled out to various locations using available local resources as the platform for sustainable change. For the first time in India we have a rural community using farm based bamboo to drive a local industry towards self reliance and managed growth. Starting with bamboo products and furniture we see the sustained action providing an uninterrupted supply of raw materials and skill sets that can foster the growth of a decentralized, local and self governed economy that could survive and thrive in the emerging era that I call the “Post industrial and Post-mining era”.
This is a new form of design action not to be confused with the form giving activity of traditional industrial design, although it would include elements from the old form of design thought and action. Here we are proposing that the design action take into account the structure of society along with their macro aspirations, their histories and cultural preferences as a starting point and from here build imaginative approaches for products, services and systems that would include the meta-system, the infrastructure, the hardware, the software and the processware to ensure a perfect fit to the circumstances and requirements of the particular situation. This kind of offering is complex and would need a multitude of knowledge and skill sets to be brought to bear with sensitive social and cultural orientation and with a fine tuned economic and technical feasibility. Design for inclusive development is therefore a multi-disciplinary activity that needs to draw a variety of knowledge and skills in an innovative and future oriented setting that is well informed about the legal and the ethical parameters. In this form it becomes a powerful political activity since it is propositional in the manner in which it visualizes and realizable alternatives for the stakeholders from which the process of selection and decision can begin. It is a democratic activity at the very heart and gives power to the people who are at the location and to those who would be most impacted by its implementation. This shift in design thinking can be better understood through the model that I have proposed that explains the three orders of design – Form, Structure and System – material & functional, aesthetic & socio- economic, environmental and political – all of which need to be addressed in all cases if we are to be assured of its sustainability and relevance to the local context. Under these terms of reference industry and business must take responsibility for end to end offer of service and not just for the delivery of brands and boxes that contain a “Good Design” product but ensure that they serve the purpose that was promised in the first place.
I do believe that design can help here and we may need to make some fundamental changes in our design education approaches and widen the base for action, a shift from a focus on business and industry to the design for public good that is operational at the local community level. These should include the grassroots workers in the design education loop and the content of such education needs to be informed by design insights that are local and rooted in the local reality for which our current crop of textbooks would be found wanting. This will need fresh approaches and enlightened support from the political establishment if these changes are to be forged. I do feel that we need to raise this debate and explore the various roles of design and its potential application that is today ignored by design education and practice alike, including my own school if I may admit here, so that a new sense of commitment is brought into the use of design in areas far outside industry and business. This is one of my mission objectives for setting up the 'Design for India" blog to help create a platform from which I can share my thoughts on the possibilities that I see in my minds eye. I also find the peer review system of the research publications as not so perfect for the dissemination of design insights although it does work wonders for science analysis and knowledge creation but it may be extremely defective for design demonstration since the idea of “design opportunity”, a very specific term – a combination of perception and imagination – excludes the viewer or reader from "seeing" the imagination part of the designers statement and therefore it compels the designer to take the idea far down the visualisation and realization path before it can even dawn on others that the idea is truly credible. This means that we may need to create a platform or even a multitude of platforms for design incubation and development that can be accessible to many across numerous areas of application and these kinds of platforms just do not exist in India today, or if it does, it is dominated by centralized administrative controls that stifle innovation and exploration which is critically needed to make the demonstration. Our policies for faculty research and action need to be liberal and this needs substantial change and autonomy for the ‘Maverick innovator” with good intentions and value systems in place to do their innovative work. Some of us have had to battle hard to achieve even a small degree of autonomy of action and this is not a good climate for addressing these complex problems which surround us here in India in an effective manner. We need new institutions and whole new mind set to address these complex issues at hand.
How do we create such autonomous and decentralized action strategies and how do we roll this out across our Universities and Institutes of design action? This will be one of the central questions that can change the current impasse in development approaches dealing with poverty in many parts of India. There are no simple answers but we will need to look deeply at our experiences in the field and build new institutes and strategies that can use the promise of design to find approaches to address these complex needs. The current conviction that we hold is the use of a macro-micro design strategy which has been developed after years of application and we need to do more before we can spread this deep conviction that we hold to others who hold the purse string in our countries where real action is needed today.
13-03-2011
Friday, March 11, 2011
Tax on Healthcare services may go in Budget revisit, hints FM
NEW DELHI: The government has indicated that it will reconsider the imposition of service tax on healthcare and re-examine other contentious tax proposals announced in the Union Budget 2011-12 . "Since the presentation of the Budget 2011-12 , I have received several suggestions and representations , including feedback from Members (MPs) on taxation proposals. These are under examination ," Finance Minister Pranab Mukherjee said during discussions on the Budget in Lok Sabha on Friday.
The minister also said that educational institutions and hospitals would be treated as infrastructure sub sectors and capital investment in them would be eligible for the finance ministry?s Viability Gap Funding Scheme. Commenting on the power situation , Mukherjee said "We hope to add 15,000 MW by the end of the current financial year. India has already added about 10,462 MW power capacity from April 2010 to February 2011, which is one of the highest capacity addition.
"Without power we cannot have the desired level of growth. Therefore emphasis was given... We have added a capacity of 10,462 MW during this year itself in the current plan, which is higher than the capacity added in any of the previous years," Mukherjee said. Power minister Sushil Kumar Shinde has exuded confidence the country could exceed 15,000 MW capacity by end of this fiscal.
Even though India has initiated various initiatives including Ultra Mega Power Projects (UMPPs), the demand for electricity is growing. The capacity addition target for the 11th Five Year Plan (ending March 31, 2012) is little over 62,000 MW. Currently, India has installed power generation capacity of over 1.75 lakh MW.
Mukherjee also said the country has started a process to trace black money stashed away in foreign banks. He said the government would work under the legal framework to bring the money back and punish the culprits. The finance minister said the government had started a legal proceeding to book the culprits.
Rollback Chorus
The government will revisit some of the proposals in the Budget 2011-12 that have led to high-pitched demands for rollback from various industry segments, FM Pranab Mukherjee said on Friday. ET takes a look at the contentious proposals:
SERVICE TAX ON HOSPITALS
10% service tax, with an abatement of 50%, on treatment at hospitals with 25 or more beds with central air-conditioning and diagnostic test services.
The minister also said that educational institutions and hospitals would be treated as infrastructure sub sectors and capital investment in them would be eligible for the finance ministry?s Viability Gap Funding Scheme. Commenting on the power situation , Mukherjee said "We hope to add 15,000 MW by the end of the current financial year. India has already added about 10,462 MW power capacity from April 2010 to February 2011, which is one of the highest capacity addition.
"Without power we cannot have the desired level of growth. Therefore emphasis was given... We have added a capacity of 10,462 MW during this year itself in the current plan, which is higher than the capacity added in any of the previous years," Mukherjee said. Power minister Sushil Kumar Shinde has exuded confidence the country could exceed 15,000 MW capacity by end of this fiscal.
Even though India has initiated various initiatives including Ultra Mega Power Projects (UMPPs), the demand for electricity is growing. The capacity addition target for the 11th Five Year Plan (ending March 31, 2012) is little over 62,000 MW. Currently, India has installed power generation capacity of over 1.75 lakh MW.
Mukherjee also said the country has started a process to trace black money stashed away in foreign banks. He said the government would work under the legal framework to bring the money back and punish the culprits. The finance minister said the government had started a legal proceeding to book the culprits.
Rollback Chorus
The government will revisit some of the proposals in the Budget 2011-12 that have led to high-pitched demands for rollback from various industry segments, FM Pranab Mukherjee said on Friday. ET takes a look at the contentious proposals:
SERVICE TAX ON HOSPITALS
10% service tax, with an abatement of 50%, on treatment at hospitals with 25 or more beds with central air-conditioning and diagnostic test services.
Dalal St seen fretting on Japan aftershocks; markets may get edgy
MUMBAI: It could be an edgy weekend for traders and investors as the Japan quake cast a shadow on the market and a tsunami threat engulfed the US west coast. The devastation in Japan is likely to be far lesser than what it suffered in the ?95 Kobe earthquake, but aerial photos of the catastrophe flashed across television screens sent jitters across financial markets, already rattled by a boiling oil and sluggish US growth.
Analysts said tsunami warnings for other Asian countries could hold back investors from buying stocks in the continent, which has already seen a flight of foreign money in 2011. ?It may add to the risk aversion already affecting many emerging markets, including India,? said V Anantha Nageswaran, head-investment research for Asia-Pacific of Bank Julius Baer.
Benchmark indices of Asian stocks fell on Friday, with Japan?s stock gauges dropping 1-2% on fears the earthquake would further strain the finances of the world?s third-largest economy. The Sensex fell 153.89 points, or 0.84%, to 18,174. Most Asian markets were already weak after China?s monthly inflation data exceeded expectations, raising fears of further monetary tightening in the country.
Unless the US and other countries in Asia are hit by tsunami, the Japan quake is unlikely to have a lasting effect on Indian stocks. But there may be other impacts. ?Japan has substantial infrastructure funding commitment in India. One needs to watch out whether that will slow down,? said Anand Tandon, CEO of JRG Securities .
A few other brokerages felt incremental inflow from Japanese investors may come down in the short run. ?Oil and US job growth will remain the big worries, but there will be movements in specific stocks having business relations with Japan ,? said a trader.
Currency dealers in India as well as abroad will closely track the market in the next few days. The rupee slipped six paise on Friday to close at 45.24/25 against the US dollar on sustained dollar demand from importers and sluggish equities. But the Japanese yen?s sharp rebound against the dollar to end with gains despite the calamity surprised many in the market.
Analysts said tsunami warnings for other Asian countries could hold back investors from buying stocks in the continent, which has already seen a flight of foreign money in 2011. ?It may add to the risk aversion already affecting many emerging markets, including India,? said V Anantha Nageswaran, head-investment research for Asia-Pacific of Bank Julius Baer.
Benchmark indices of Asian stocks fell on Friday, with Japan?s stock gauges dropping 1-2% on fears the earthquake would further strain the finances of the world?s third-largest economy. The Sensex fell 153.89 points, or 0.84%, to 18,174. Most Asian markets were already weak after China?s monthly inflation data exceeded expectations, raising fears of further monetary tightening in the country.
Unless the US and other countries in Asia are hit by tsunami, the Japan quake is unlikely to have a lasting effect on Indian stocks. But there may be other impacts. ?Japan has substantial infrastructure funding commitment in India. One needs to watch out whether that will slow down,? said Anand Tandon, CEO of JRG Securities .
A few other brokerages felt incremental inflow from Japanese investors may come down in the short run. ?Oil and US job growth will remain the big worries, but there will be movements in specific stocks having business relations with Japan ,? said a trader.
Currency dealers in India as well as abroad will closely track the market in the next few days. The rupee slipped six paise on Friday to close at 45.24/25 against the US dollar on sustained dollar demand from importers and sluggish equities. But the Japanese yen?s sharp rebound against the dollar to end with gains despite the calamity surprised many in the market.
Essar to spend $750m to revive Zimbabwe group
Essar, the Indian conglomerate, plans to spend at least $750m to revive Zimbabwe’s stricken state-owned steel company in a deal that advances Asian groups’ thrust into Africa.
The agreement will see the Mumbai-based telecoms-to-refining conglomerate take majority stakes in joint ventures that will take over the assets of the Zimbabwe Iron and Steel Company.
It accelerates the Indian private sector’s push into a continent where Chinese state-owned groups have made the running in the race for markets and resources.
“We believe the new ventures will be well positioned to be a low-cost steel producer that can meet the growing demands of the regional steel market and capitalise on the forecast growth in sub-Saharan Africa,” Firdhose Coovadia, Essar’s resident director for the Middle East and Africa, said.
Essar’s Zimbabwean venture expands an African presence that includes coal assets in neighbouring Mozambique, oil projects in Nigeria and Madagascar and a telecoms business in India.
The group, controlled by the Ruia brothers, its billionaire founders, saw off rival bidders including ArcelorMittal, whose main owner is Lakshmi Mittal, the steel mogul.
Robert Mugabe, Zimbabwe’s president, said last year that Arcelor was “too big” for the country.
Essar planned to spend an initial $750m restarting steel manufacturing operations that had sunk into disrepair, a person familiar with the plans said.
Mr Coovadia acknowledged that this would be a “challenging task”.
It aims to bring the plants, which have capacity to produce 1m tonnes of steel, back into operation within 12 to 15 months and to target the African market.
Essar’s steel arm aims to increase production to 14m tonnes per annum from 8.6m by next year.
Like peers including Tata Steel, India’s biggest producer, Essar is seeking to lock in supplies of iron and coal – the raw materials of steelmaking – at a time when high commodity prices are eroding margins.
As well as a 60 per cent stake in a steel joint venture with Zimbabwe’s government, Essar will take an 80 per cent holding in a separate joint venture that will control the former state-owned group’s mineral resources, potentially affording it access to what are thought to be Zimbabwe’s substantial iron ore stocks.
Welshman Ncube, industry minister in a fractious power-sharing government between Mr Mugabe’s party and the former opposition led by Morgan Tsvangirai, prime minister, said Zisco was “totally, completely insolvent”.
Essar will assume the company’s debts, which Mr Ncube said were in excess of $340 million.
The company was worth only about $45m, he said.
The agreement will see the Mumbai-based telecoms-to-refining conglomerate take majority stakes in joint ventures that will take over the assets of the Zimbabwe Iron and Steel Company.
It accelerates the Indian private sector’s push into a continent where Chinese state-owned groups have made the running in the race for markets and resources.
“We believe the new ventures will be well positioned to be a low-cost steel producer that can meet the growing demands of the regional steel market and capitalise on the forecast growth in sub-Saharan Africa,” Firdhose Coovadia, Essar’s resident director for the Middle East and Africa, said.
Essar’s Zimbabwean venture expands an African presence that includes coal assets in neighbouring Mozambique, oil projects in Nigeria and Madagascar and a telecoms business in India.
The group, controlled by the Ruia brothers, its billionaire founders, saw off rival bidders including ArcelorMittal, whose main owner is Lakshmi Mittal, the steel mogul.
Robert Mugabe, Zimbabwe’s president, said last year that Arcelor was “too big” for the country.
Essar planned to spend an initial $750m restarting steel manufacturing operations that had sunk into disrepair, a person familiar with the plans said.
Mr Coovadia acknowledged that this would be a “challenging task”.
It aims to bring the plants, which have capacity to produce 1m tonnes of steel, back into operation within 12 to 15 months and to target the African market.
Essar’s steel arm aims to increase production to 14m tonnes per annum from 8.6m by next year.
Like peers including Tata Steel, India’s biggest producer, Essar is seeking to lock in supplies of iron and coal – the raw materials of steelmaking – at a time when high commodity prices are eroding margins.
As well as a 60 per cent stake in a steel joint venture with Zimbabwe’s government, Essar will take an 80 per cent holding in a separate joint venture that will control the former state-owned group’s mineral resources, potentially affording it access to what are thought to be Zimbabwe’s substantial iron ore stocks.
Welshman Ncube, industry minister in a fractious power-sharing government between Mr Mugabe’s party and the former opposition led by Morgan Tsvangirai, prime minister, said Zisco was “totally, completely insolvent”.
Essar will assume the company’s debts, which Mr Ncube said were in excess of $340 million.
The company was worth only about $45m, he said.
China, India driving global oil demand: Obama
WASHINGTON: Increased use energy resources by fast growing economies like India, China and Brazil is driving the global oil and gas demand, US President Barack Obama said on Saturday.
"The problem is a great deal of uncertainty in the oil markets, part of it prompted by the fact that the economy's growing faster in some places than others, but you've got China and India and Brazil and other emerging nations that are using more and more energy as their economies advance," Obama said at a news conference when asked about the rising gas prices in the US.
Following the current unrest in the Middle East, gas prices in the US have crossed USD 3.5 a gallon and is expected to further go up, which is prompting demand of use of strategic oil reserve, which Obama said is an option not under consideration right now because there is no major disruption in oil supplies.
"We already saw that trend in 2008. Because of the worldwide recession oil prices went back down, but to some degree a lot of what's happening in prices is as a consequence of economic growth, and countries and economies starting to use more oil.
"Part of it, though, is also uncertainty in terms of what's happening in the Middle East," he said.
"One of the messages that I want to send today is that we are confident about our ability to fill any potential gaps in supply. Libya, for example, does not account for a large portion of overall world production.
"They provide a type of oil that is highly valued and there's a high premium on it, but basically even if Libyan oil production was suspended for a significant period of time because of the unrest there, we'd be able to fill that gap. So a lot of this has to do with uncertainty in the market," he said.
Obama said the idea behind the Strategic Petroleum Reserve is if there was a severe disruption in supply, similar to what happened in the '70s, for example, when OPEC making a decision not to sell for a while, how would the US economy continue to function, and making sure that Americans have sufficient supplies for that.
"Another example would be during Hurricane Katrina when you've got a whole bunch of refineries that have been impacted and production in the Gulf has been impacted. You know, that's another example where in a short term you can fill that hole," he said.
Obama said rising prices are not a new phenomena. "Three years ago, before the recession hit, a combination of factors, including rising demand from emerging economies like China, drove gas prices to more than USD 4 a gallon," he said.
"The world-wide recession and the decrease in demand pushed prices back down. But over the past year, as the economy has picked up steam and global demand for oil has increased, prices have increased again," he added.
Obama said the turmoil in North Africa and the Middle East has added uncertainty to the mix, and lost production in Libya has tightened supply.
"The global community can manage supply disruptions like this. Other oil-producing nations have committed to filling any gaps. And we will continue to coordinate closely with our international partners to keep all options on the table when it comes to any supply disruptions," he said.
"The problem is a great deal of uncertainty in the oil markets, part of it prompted by the fact that the economy's growing faster in some places than others, but you've got China and India and Brazil and other emerging nations that are using more and more energy as their economies advance," Obama said at a news conference when asked about the rising gas prices in the US.
Following the current unrest in the Middle East, gas prices in the US have crossed USD 3.5 a gallon and is expected to further go up, which is prompting demand of use of strategic oil reserve, which Obama said is an option not under consideration right now because there is no major disruption in oil supplies.
"We already saw that trend in 2008. Because of the worldwide recession oil prices went back down, but to some degree a lot of what's happening in prices is as a consequence of economic growth, and countries and economies starting to use more oil.
"Part of it, though, is also uncertainty in terms of what's happening in the Middle East," he said.
"One of the messages that I want to send today is that we are confident about our ability to fill any potential gaps in supply. Libya, for example, does not account for a large portion of overall world production.
"They provide a type of oil that is highly valued and there's a high premium on it, but basically even if Libyan oil production was suspended for a significant period of time because of the unrest there, we'd be able to fill that gap. So a lot of this has to do with uncertainty in the market," he said.
Obama said the idea behind the Strategic Petroleum Reserve is if there was a severe disruption in supply, similar to what happened in the '70s, for example, when OPEC making a decision not to sell for a while, how would the US economy continue to function, and making sure that Americans have sufficient supplies for that.
"Another example would be during Hurricane Katrina when you've got a whole bunch of refineries that have been impacted and production in the Gulf has been impacted. You know, that's another example where in a short term you can fill that hole," he said.
Obama said rising prices are not a new phenomena. "Three years ago, before the recession hit, a combination of factors, including rising demand from emerging economies like China, drove gas prices to more than USD 4 a gallon," he said.
"The world-wide recession and the decrease in demand pushed prices back down. But over the past year, as the economy has picked up steam and global demand for oil has increased, prices have increased again," he added.
Obama said the turmoil in North Africa and the Middle East has added uncertainty to the mix, and lost production in Libya has tightened supply.
"The global community can manage supply disruptions like this. Other oil-producing nations have committed to filling any gaps. And we will continue to coordinate closely with our international partners to keep all options on the table when it comes to any supply disruptions," he said.
Rajat Gupta takes 'leave of absence' from New Silk Route
MUMBAI: McKinsey veteran Rajat Gupta has decided to take "leave of absence" from the management of the $1.4-billion PE fund New Silk Route which he co-founded five years ago. Gupta is facing charges from the Securities Exchange Commission of the US for conspiring with his associate and hedge fund manager Raj Rajaratnam who stands accused in a sensational insider trading trial.
New Silk Route (NSR) said Gupta took voluntary decision to proceed on leave of absence till he sorts out his issues. This would also avoid any distraction and ensure NSR's continued focus on the execution of its investment strategy. The fund, which tracks investment opportunities in India and neighbouring south Asian markets, maintained that "matters involving Gupta have nothing to do with NSR or any of our portfolio firms. The allegations relate to US public markets, while the fund is focused on investing in private companies in the Indian sub-continent".
On Monday, Gupta also exited the boards of Genpact, American Airlines and Harman International just before the Rajaratnam trial commenced in a Manhattan federal court. He resigned from the board of Procter & Gamble and Goldman Sachs earlier. SEC had filed civil charges against the best known Indian face in Corporate America alleging that he passed on sensitive boardroom details of Goldman Sachs and P&G to Rajaratnam. Gupta's lawyers have refuted the charges as "baseless" and said he did not profit from any of these alleged tip-offs.
NSR had started communicating with its international investors, or limited partners (LPs), soon after charges were filed against Gupta last week. The reaction of the American and European LPs to the unfolding development is crucial, and it is not clear whether their feedback played any role in his leave of absence. TOI's query to New Silk Route's US-based PR firm in this regard did not elicit any response.
Rajaratnam was supposed to figure prominently in the establishment of NSR when it was originally planned. He The main accused in the insider trading scandal was expected to spearhead a hedge fund variant focused on the sub-continent. But the plan did not materialize. Gupta went ahead with the private equity fund in which Victor Menezes and Parag Saxena are co-founders.
Meanwhile, Gupta, 62, remains as the chairman of Hyderabad-based Indian School of Business (ISB). Pressure has been mounting on this management honcho, and a big endorser of the India investment story, to quit ISB's executive board till his name is cleared in the ongoing scandal. But the ISB board, which include some of corporate India's best known CEOs, has rallied behind the troubled man who was till recently one of the most credible faces of corporate governance globally.
New Silk Route (NSR) said Gupta took voluntary decision to proceed on leave of absence till he sorts out his issues. This would also avoid any distraction and ensure NSR's continued focus on the execution of its investment strategy. The fund, which tracks investment opportunities in India and neighbouring south Asian markets, maintained that "matters involving Gupta have nothing to do with NSR or any of our portfolio firms. The allegations relate to US public markets, while the fund is focused on investing in private companies in the Indian sub-continent".
On Monday, Gupta also exited the boards of Genpact, American Airlines and Harman International just before the Rajaratnam trial commenced in a Manhattan federal court. He resigned from the board of Procter & Gamble and Goldman Sachs earlier. SEC had filed civil charges against the best known Indian face in Corporate America alleging that he passed on sensitive boardroom details of Goldman Sachs and P&G to Rajaratnam. Gupta's lawyers have refuted the charges as "baseless" and said he did not profit from any of these alleged tip-offs.
NSR had started communicating with its international investors, or limited partners (LPs), soon after charges were filed against Gupta last week. The reaction of the American and European LPs to the unfolding development is crucial, and it is not clear whether their feedback played any role in his leave of absence. TOI's query to New Silk Route's US-based PR firm in this regard did not elicit any response.
Rajaratnam was supposed to figure prominently in the establishment of NSR when it was originally planned. He The main accused in the insider trading scandal was expected to spearhead a hedge fund variant focused on the sub-continent. But the plan did not materialize. Gupta went ahead with the private equity fund in which Victor Menezes and Parag Saxena are co-founders.
Meanwhile, Gupta, 62, remains as the chairman of Hyderabad-based Indian School of Business (ISB). Pressure has been mounting on this management honcho, and a big endorser of the India investment story, to quit ISB's executive board till his name is cleared in the ongoing scandal. But the ISB board, which include some of corporate India's best known CEOs, has rallied behind the troubled man who was till recently one of the most credible faces of corporate governance globally.
Filter coffee to rise by 50 per kg
BANGALORE: Your regular filter coffee will soon sport a pricier tag with the price of arabica coffee beans substantially shooting up over the last few months. Filter coffee is generally a blended mix of around 70% arabica coffee with chicory and robusta coffee.
Raw arabica coffee beans are now being sold at around Rs 270 per kg by planters , according Babu Reddy, agricultural economist at the Coffee Board. This is up from around Rs 215 per kg in December and Rs 160 per kg in August. Green coffee beans are processed and then sold as filter coffee powder.
The secretary of the Coffee Roasters' Association of India, B S Surya Prakash, said that filter coffee powder will now be retailed at Rs 50 per kg higher. The retail price for filter coffee will now be around Rs 350-400 per kg. Filter coffee powder in India is supplied to retail chains and restaurants by roasters like Cothas Coffee and corporate houses like Tata Coffee.
Filter coffee brands like Tata Coffee's Mr Bean, Cothas Coffee and Bayar's Coffee are said to have incorporated price changes . It is unclear if MNCs like Nestle will also increase prices. Around 45% of coffee consumed in India is filter coffee, while the remaining is in the form of instant coffee.
Srikanth Rao, the owner of Bayar's Coffee, said that many restaurants have already increased prices as milk prices and rising coffee powder prices impacts them. There are mixed views over the reasons behind the rise in coffee prices. Coffee is an international commodity whose prices are affected by changing global production and trading dynamics. Some analysts believe that speculative funds are the cause. But most industry insiders blame production constraints in major coffee producing nations – Colombia, Indonesia and Brazil – combined with rising demand for coffee.
Globally, though coffee is mainly produced in the southern hemisphere in countries such as Brazil, Colombia, India, Ethiopia and Vietnam, the major consumers are in the developed world. Prices are generally determined in international exchanges like the New York Intercontinental exchange (ICE).
In February, coffee prices globally touched levels not seen over the last decade, trading at $2.78 a pound in New York. Arabica coffee prices have risen more than 46% over the past six months according to International Coffee Organization reports.
The Coffee Board's post monsoon crop forecast for India for the year 2010-11 is placed at 299,000 metric tons. Generally around 70% of Indian coffee is exported and the balance consumed domestically .
Raw arabica coffee beans are now being sold at around Rs 270 per kg by planters , according Babu Reddy, agricultural economist at the Coffee Board. This is up from around Rs 215 per kg in December and Rs 160 per kg in August. Green coffee beans are processed and then sold as filter coffee powder.
The secretary of the Coffee Roasters' Association of India, B S Surya Prakash, said that filter coffee powder will now be retailed at Rs 50 per kg higher. The retail price for filter coffee will now be around Rs 350-400 per kg. Filter coffee powder in India is supplied to retail chains and restaurants by roasters like Cothas Coffee and corporate houses like Tata Coffee.
Filter coffee brands like Tata Coffee's Mr Bean, Cothas Coffee and Bayar's Coffee are said to have incorporated price changes . It is unclear if MNCs like Nestle will also increase prices. Around 45% of coffee consumed in India is filter coffee, while the remaining is in the form of instant coffee.
Srikanth Rao, the owner of Bayar's Coffee, said that many restaurants have already increased prices as milk prices and rising coffee powder prices impacts them. There are mixed views over the reasons behind the rise in coffee prices. Coffee is an international commodity whose prices are affected by changing global production and trading dynamics. Some analysts believe that speculative funds are the cause. But most industry insiders blame production constraints in major coffee producing nations – Colombia, Indonesia and Brazil – combined with rising demand for coffee.
Globally, though coffee is mainly produced in the southern hemisphere in countries such as Brazil, Colombia, India, Ethiopia and Vietnam, the major consumers are in the developed world. Prices are generally determined in international exchanges like the New York Intercontinental exchange (ICE).
In February, coffee prices globally touched levels not seen over the last decade, trading at $2.78 a pound in New York. Arabica coffee prices have risen more than 46% over the past six months according to International Coffee Organization reports.
The Coffee Board's post monsoon crop forecast for India for the year 2010-11 is placed at 299,000 metric tons. Generally around 70% of Indian coffee is exported and the balance consumed domestically .
Sensex falls by 154 pts on lower factory output
The BSE benchmark Sensex declined by 154 points on selling by funds after slower factory output growth raised concerns of RBI raising interest rates, amid a weak global trend. The Bombay Stock Exchange benchmark Sensex, which had lost 142 points in the previous session, fell further by 153.89 points
to 18,174.09, after touching the day's low of 18,063.29.
Similarly, the broad-based National Stock Exchange index Nifty lost 48.95 points to 5,445.45, after hitting a low of 5,411.55 points during the session.
Dealers said slower growth in factory output and volatile crude oil prices in global markets continued to haunt the trading sentiment.
"The fight against inflation will continue as policy makers watch surging crude oil prices," said Rajiv Malik of Delhi-based broking firm RNM Financial Services.
The country imports about 75 % of its oil, the cost of which is up 25 % from the previous year in New York this week. The Reserve Bank of India raised interest rate seven times since March 2010, and indicated more hikes to curb the pace of commodity price rise.
Meanwhile, the industrial output growth slowed to 3.7 % in January from 16.8 % a year ago, dragged down by the poor performance of the manufacturing sector, particularly the capital goods.
A weak trend in the Asian region and lower opening in Europe further influenced the market sentiment. Asian stock markets slipped further after sharp falls on Wall Street and higher-than-expected Chinese inflation data.
In the afternoon, a major Japanese earthquake caused the yen to fall sharply against the US dollar.
Bharat Heavy Electricals, the biggest power-equipment maker, declined 3.64 % to Rs 1,974.70. Housing Development Finance Corp, the largest mortgage lender fell by 0.93 % to Rs 660.65, taking its slide since March 4 to 4.4 %.
However, the heaviest on the Sensex Reliance Industries rose by 7.15 to Rs 991.60 and ONGC ltd by Rs 5.90 to Rs 281.30. The two carry nearly 14 % weightage on the index.
The metal index suffered the most by losing 1.91 per cent to 15,367.78 followed by teck index by 1.61 % to 3,597.61. IT sector index lost 1.40 % to 6,149.98 and power index by 1.49 % to 2,554.03.
As selling remained wide-based, the smallcap index fell by 1.12 % to 7,899.81 and midcap index by 1.07 % to 6,529.28.
to 18,174.09, after touching the day's low of 18,063.29.
Similarly, the broad-based National Stock Exchange index Nifty lost 48.95 points to 5,445.45, after hitting a low of 5,411.55 points during the session.
Dealers said slower growth in factory output and volatile crude oil prices in global markets continued to haunt the trading sentiment.
"The fight against inflation will continue as policy makers watch surging crude oil prices," said Rajiv Malik of Delhi-based broking firm RNM Financial Services.
The country imports about 75 % of its oil, the cost of which is up 25 % from the previous year in New York this week. The Reserve Bank of India raised interest rate seven times since March 2010, and indicated more hikes to curb the pace of commodity price rise.
Meanwhile, the industrial output growth slowed to 3.7 % in January from 16.8 % a year ago, dragged down by the poor performance of the manufacturing sector, particularly the capital goods.
A weak trend in the Asian region and lower opening in Europe further influenced the market sentiment. Asian stock markets slipped further after sharp falls on Wall Street and higher-than-expected Chinese inflation data.
In the afternoon, a major Japanese earthquake caused the yen to fall sharply against the US dollar.
Bharat Heavy Electricals, the biggest power-equipment maker, declined 3.64 % to Rs 1,974.70. Housing Development Finance Corp, the largest mortgage lender fell by 0.93 % to Rs 660.65, taking its slide since March 4 to 4.4 %.
However, the heaviest on the Sensex Reliance Industries rose by 7.15 to Rs 991.60 and ONGC ltd by Rs 5.90 to Rs 281.30. The two carry nearly 14 % weightage on the index.
The metal index suffered the most by losing 1.91 per cent to 15,367.78 followed by teck index by 1.61 % to 3,597.61. IT sector index lost 1.40 % to 6,149.98 and power index by 1.49 % to 2,554.03.
As selling remained wide-based, the smallcap index fell by 1.12 % to 7,899.81 and midcap index by 1.07 % to 6,529.28.
Pvt insurers seek level playing field with LIC
Urge Irda for a 3-5 yrs horizon to adopt revised norms on Ulips.
Private sector life insurance companies have sought a level playing field with government-owned Life Insurance Corporation of India (LIC), and have urged the insurance regulator for a three-five years horizon to adopt the revised regulatory architecture.
“One of the most disturbing trends, post the new regulations, is that LIC accounted for 71 per cent of the new business income in the life insurance sector, during the first 10 months of the financial year. It is in contrast to the trend in the last two-three years, when private sector players increased their share to around 50 percent of the new business income,” said P Nandagopal, managing director and CEO, IndiaFirst Life, during the Business Standard Insurance Round Table in Mumbai yesterday.
The Insurance Regulatory and Development Authority (Irda) had implemented new guidelines on unit-linked insurance plans (Ulips) from September, which capped the agent’s commission and mandated a minimum guarantee on pension products. The move was aimed at ensuring greater protection to policyholders and higher level of product disclosure.
First-year premium collections by life insurance companies increased 25.8 per cent to Rs 94,820 crore in the April-January period of the current financial year, mainly led by a surge in premium collection of LIC. The largest insurer’s premium income for April-January rose 36.9 per cent to Rs 67,135 crore, whereas private insurers posted a marginal 5.8 per cent increase to Rs 27,864 crore. During the same period last year, total first-year premium collected by the industry stood at Rs 75,347 crore.
“The new premium income of private insurance sector declined 40 per cent after September, which is not a good sign, whatever the growth may have been during the first 10 years. The new regulations have ensured that the industry is forced to sell more traditional products. And, since LIC has been selling traditional products, it has gained at the expense of private players,” said Amitabh Chaudhry, managing director and CEO, HDFC Standard Life.
“The main purpose of every regulation is customer protection. To this, there is no dispute and everybody is in the same pitch. When the main objective is the same, should we not have a level playing field between the private sector and the public sector, between the traditional plans and Ulips, between different distribution channels of the bank?” asked Nandagopal.
Keeping in mind the expected changes in the insurance industry, private players have sought a map for the next three-five years, so that companies can respond to changes quickly. “We would like to see a detailed map for the next three-five years, so that we can take the general industry forward. It would help us plan our business,” said Bhargav Dasgupta, CEO & managing director, ICICI Lombard General Insurance Company.
“As far as the upcoming challenges are concerned, the implementation of International Financial Reporting Services accounting norms will affect the industry, and also the Direct Taxes Code in its present form will be decremental to the industry’s growth,” said Gaurav Garg, managing director and CEO, Tata AIG General Insurance Company.
Industry would benefit if we have a map from the regulator as to what is expected in the next four-five years. We would be in a position to change our operating model and respond accordingly, Chaudhry added.
Private sector life insurance companies have sought a level playing field with government-owned Life Insurance Corporation of India (LIC), and have urged the insurance regulator for a three-five years horizon to adopt the revised regulatory architecture.
“One of the most disturbing trends, post the new regulations, is that LIC accounted for 71 per cent of the new business income in the life insurance sector, during the first 10 months of the financial year. It is in contrast to the trend in the last two-three years, when private sector players increased their share to around 50 percent of the new business income,” said P Nandagopal, managing director and CEO, IndiaFirst Life, during the Business Standard Insurance Round Table in Mumbai yesterday.
The Insurance Regulatory and Development Authority (Irda) had implemented new guidelines on unit-linked insurance plans (Ulips) from September, which capped the agent’s commission and mandated a minimum guarantee on pension products. The move was aimed at ensuring greater protection to policyholders and higher level of product disclosure.
First-year premium collections by life insurance companies increased 25.8 per cent to Rs 94,820 crore in the April-January period of the current financial year, mainly led by a surge in premium collection of LIC. The largest insurer’s premium income for April-January rose 36.9 per cent to Rs 67,135 crore, whereas private insurers posted a marginal 5.8 per cent increase to Rs 27,864 crore. During the same period last year, total first-year premium collected by the industry stood at Rs 75,347 crore.
“The new premium income of private insurance sector declined 40 per cent after September, which is not a good sign, whatever the growth may have been during the first 10 years. The new regulations have ensured that the industry is forced to sell more traditional products. And, since LIC has been selling traditional products, it has gained at the expense of private players,” said Amitabh Chaudhry, managing director and CEO, HDFC Standard Life.
“The main purpose of every regulation is customer protection. To this, there is no dispute and everybody is in the same pitch. When the main objective is the same, should we not have a level playing field between the private sector and the public sector, between the traditional plans and Ulips, between different distribution channels of the bank?” asked Nandagopal.
Keeping in mind the expected changes in the insurance industry, private players have sought a map for the next three-five years, so that companies can respond to changes quickly. “We would like to see a detailed map for the next three-five years, so that we can take the general industry forward. It would help us plan our business,” said Bhargav Dasgupta, CEO & managing director, ICICI Lombard General Insurance Company.
“As far as the upcoming challenges are concerned, the implementation of International Financial Reporting Services accounting norms will affect the industry, and also the Direct Taxes Code in its present form will be decremental to the industry’s growth,” said Gaurav Garg, managing director and CEO, Tata AIG General Insurance Company.
Industry would benefit if we have a map from the regulator as to what is expected in the next four-five years. We would be in a position to change our operating model and respond accordingly, Chaudhry added.
Japan quake spooks India Inc, markets
Hundreds die in the country’s worst quake, tsunami in 140 years
Japan’s most powerful earthquake in 140 years on Friday caused massive damage in the country’s northeast, triggering a 10-metre tsunami across the Pacific basin and sending global stocks to their lowest level in nearly six weeks. Crude oil fell below $100 a barrel.Hundreds of people had been killed in the quake and the following tsunami in the world’s third-largest economy, reports said. Tsunami warnings were sounded across the Pacific, including South America, Canada, Alaska and the US.Several cities and villages felt violent tremors hundreds of kilometres away from the epicentre. As many as 80 buildings, many of them in Tokyo, burst into flames.As Japan counted the damage -- reports said a radioactive leak was possible at a nuclear plant in Fukushima, north of Tokyo, a refinery was on fire and thousands of factories were shut down — India Inc was on its toes, fearing for the safety of its workers in the island nation.
Nasscom, a representative body of IT and ITeS firms in India, said there had been no loss of life and property, as most Indian IT companies were located in Tokyo and Osaka regions.
Sudeep Banerjee, the CEO of L&T Infotech, said the company’s 80 employees in Yokohama, 250 kilometres from the epicentre of the earthquake, were safe.
Narrating the day’s events, he said as part of his routine, he spoke to his country head in Japan, K N Prabhakaran, at 9.30am, nearly two hours before the earthquake hit.
TWITTER TALK
ANAND MAHINDRA, M&M Vice-Chairman & MD: Frightening to watch a tsunami live on screen as it relentlessly moves on its destructive course
VIJAY MALLYA, UB Group Chairman: The power of the ocean is frightening. Boats, cars, buildings being swept away in a sludge of tsunami fury, following the Japan quake
ABHISHEK BACHCHAN, actor: A control room has been established in the Embassy of India, Tokyo, which can be contacted on 00813 32622391 to 97
SHEKHAR KAPOOR, film maker: Watching videos from Japan was like watching an apocalypse
Everything seemed fine then. After hearing about the quake at 11.30am, he tried to contact Prabhakaran over phone. But, the phone lines were dead. However, he soon got an email from Prabhakaran, stating that the employees were safe. Since then, he has been getting updates from Prabhakaran every hour. Banerjee is closely tracking the situation there, like most CEOs of Indian IT companies that have operations in Japan.
Infosys CEO and MD Kris Gopalakrishnan, who is in London, has been getting regular updates from Japan. Infosys’ main office is in relatively safer Tokyo. The company also has several employees in the cities of Fukuoka and Nagoya. “We are in touch with our Japan head through email as the phone lines are down. We will have to wait and see the far-reaching impact of this calamity. Right now, we are making sure that our people are safe,” he said. Infosys has over 250 employees in Japan.
India’s third-largest IT services company, Wipro, is also in touch with its Japan head, Hiroshi Alley. The company has about 400 people in Tokyo and Yokohama. “I am in touch with many of our Japanese colleagues, including Alley,” said Rajan Kohli, the chief marketing officer of Wipro Technologies. “All are our employees are safe,” he said.
“Our employees are still here. We have bought them food and are keeping the office open 24 hours until we arrange their return, as trains are down, subways are down, and the traffic is very bad,” Alley told Business Standard from his office in Japan.
TCS officials spoke to their delivery head in Japan soon after hearing about the incident. TCS’ office, a few hundred metres from Wipro’s in Yokohama, has 200-300 people. “As phone lines are dead, we are in touch with our delivery centre head and other senior people through email. Our employees are safe,” said a company spokesperson.
Mid-sized IT services company iGate, which has about 100 people in Yokohama, also said its employees were safe.
Hari Thalapalli, chief people officer and chief marketing officer of Mahindra Satyam, said the company had set up a help desk at its Tokyo office, where they have close to 100 employees. “Our associates are safe. But they are quite disturbed,” he said. Thalapalli said due to unavailability of transport, the company was making sure that either the stranded employees stayed back in office or in friends’ houses. “Hotels are not available. But things should get better in a day or so,” he said.
IT and BPO services firm Patni said the company had taken measures to ensure employees’ safety and business continuity.
Hiroshi Takashina, managing director, Nikon India, said, “I got in touch with our head office in Tokyo. We have a facility in Miyagi, one of the places affected by the quake. There is no damage to property and none of our employees have been injured.”
Maruti Suzuki has close to 100 Indian engineers in Japan. “Maruti Suzuki India Chairman R C Bhargava and Managing Director Shinzo Nakanishi were on their way back to India at the time of the earthquake. They are safe,” said a spokesperson.
Shashank Srivastava, chief general manager (marketing), MSIL, said, “Some of the factories are close to the coast. Till now we have not got any news of operations being affected.”
A spokesperson for Honda Siel Cars India said, “We are trying to ascertain that all our colleagues are safe in Japan. It is difficult to get in touch with them right now as the phone lines are down.”
Toyota and its affiliates have temporarily shut three plants.
In India, the main stock indices edged lower after paring some intra-day losses, reacting to the earthquake.
Japan’s most powerful earthquake in 140 years on Friday caused massive damage in the country’s northeast, triggering a 10-metre tsunami across the Pacific basin and sending global stocks to their lowest level in nearly six weeks. Crude oil fell below $100 a barrel.Hundreds of people had been killed in the quake and the following tsunami in the world’s third-largest economy, reports said. Tsunami warnings were sounded across the Pacific, including South America, Canada, Alaska and the US.Several cities and villages felt violent tremors hundreds of kilometres away from the epicentre. As many as 80 buildings, many of them in Tokyo, burst into flames.As Japan counted the damage -- reports said a radioactive leak was possible at a nuclear plant in Fukushima, north of Tokyo, a refinery was on fire and thousands of factories were shut down — India Inc was on its toes, fearing for the safety of its workers in the island nation.
Nasscom, a representative body of IT and ITeS firms in India, said there had been no loss of life and property, as most Indian IT companies were located in Tokyo and Osaka regions.
Sudeep Banerjee, the CEO of L&T Infotech, said the company’s 80 employees in Yokohama, 250 kilometres from the epicentre of the earthquake, were safe.
Narrating the day’s events, he said as part of his routine, he spoke to his country head in Japan, K N Prabhakaran, at 9.30am, nearly two hours before the earthquake hit.
TWITTER TALK
ANAND MAHINDRA, M&M Vice-Chairman & MD: Frightening to watch a tsunami live on screen as it relentlessly moves on its destructive course
VIJAY MALLYA, UB Group Chairman: The power of the ocean is frightening. Boats, cars, buildings being swept away in a sludge of tsunami fury, following the Japan quake
ABHISHEK BACHCHAN, actor: A control room has been established in the Embassy of India, Tokyo, which can be contacted on 00813 32622391 to 97
SHEKHAR KAPOOR, film maker: Watching videos from Japan was like watching an apocalypse
Everything seemed fine then. After hearing about the quake at 11.30am, he tried to contact Prabhakaran over phone. But, the phone lines were dead. However, he soon got an email from Prabhakaran, stating that the employees were safe. Since then, he has been getting updates from Prabhakaran every hour. Banerjee is closely tracking the situation there, like most CEOs of Indian IT companies that have operations in Japan.
Infosys CEO and MD Kris Gopalakrishnan, who is in London, has been getting regular updates from Japan. Infosys’ main office is in relatively safer Tokyo. The company also has several employees in the cities of Fukuoka and Nagoya. “We are in touch with our Japan head through email as the phone lines are down. We will have to wait and see the far-reaching impact of this calamity. Right now, we are making sure that our people are safe,” he said. Infosys has over 250 employees in Japan.
India’s third-largest IT services company, Wipro, is also in touch with its Japan head, Hiroshi Alley. The company has about 400 people in Tokyo and Yokohama. “I am in touch with many of our Japanese colleagues, including Alley,” said Rajan Kohli, the chief marketing officer of Wipro Technologies. “All are our employees are safe,” he said.
“Our employees are still here. We have bought them food and are keeping the office open 24 hours until we arrange their return, as trains are down, subways are down, and the traffic is very bad,” Alley told Business Standard from his office in Japan.
TCS officials spoke to their delivery head in Japan soon after hearing about the incident. TCS’ office, a few hundred metres from Wipro’s in Yokohama, has 200-300 people. “As phone lines are dead, we are in touch with our delivery centre head and other senior people through email. Our employees are safe,” said a company spokesperson.
Mid-sized IT services company iGate, which has about 100 people in Yokohama, also said its employees were safe.
Hari Thalapalli, chief people officer and chief marketing officer of Mahindra Satyam, said the company had set up a help desk at its Tokyo office, where they have close to 100 employees. “Our associates are safe. But they are quite disturbed,” he said. Thalapalli said due to unavailability of transport, the company was making sure that either the stranded employees stayed back in office or in friends’ houses. “Hotels are not available. But things should get better in a day or so,” he said.
IT and BPO services firm Patni said the company had taken measures to ensure employees’ safety and business continuity.
Hiroshi Takashina, managing director, Nikon India, said, “I got in touch with our head office in Tokyo. We have a facility in Miyagi, one of the places affected by the quake. There is no damage to property and none of our employees have been injured.”
Maruti Suzuki has close to 100 Indian engineers in Japan. “Maruti Suzuki India Chairman R C Bhargava and Managing Director Shinzo Nakanishi were on their way back to India at the time of the earthquake. They are safe,” said a spokesperson.
Shashank Srivastava, chief general manager (marketing), MSIL, said, “Some of the factories are close to the coast. Till now we have not got any news of operations being affected.”
A spokesperson for Honda Siel Cars India said, “We are trying to ascertain that all our colleagues are safe in Japan. It is difficult to get in touch with them right now as the phone lines are down.”
Toyota and its affiliates have temporarily shut three plants.
In India, the main stock indices edged lower after paring some intra-day losses, reacting to the earthquake.
Thursday, March 10, 2011
Budget hike won't help education sector: Kapil Sibal
NEW DELHI: The 24 percent hike in the outlay for education announced in the union budget will not help the sector because what is needed is a change in mindset, Human Resource Development Minister Kapil Sibal said Thursday.
"A 24 percent budget hike will not help the education sector. It is not just money allocation that we need, the country needs a change in mindsets involved in teaching, the quality of education and the education provider," Sibal said at the inauguration of the three-day Emerging Directions in Global Education (EDGE) conference in the capital.
"To change the dimensions of higher education in the country, we need a whole new crop of teachers who are responsible and willing to teach from their hearts," the minister added.
The annual EDGE conference brings together the heads of higher education institutions from all over the country, including vice chancellors, directors and educationists, to interact on policy making in the higher education sector.
"While focusing on higher education, we also need to think of the diluting quality because of mushrooming institutes. The ministry has often done checks in such private institutions where the entire faculty is hired for a very short period to lure students," Sibal said, referring to the money minting business in the education business.
According to statistics by Ernst and Young, nearly 40 million students are expected to opt for higher education by the year 2020, compared to the current 17 million.
"A 24 percent budget hike will not help the education sector. It is not just money allocation that we need, the country needs a change in mindsets involved in teaching, the quality of education and the education provider," Sibal said at the inauguration of the three-day Emerging Directions in Global Education (EDGE) conference in the capital.
"To change the dimensions of higher education in the country, we need a whole new crop of teachers who are responsible and willing to teach from their hearts," the minister added.
The annual EDGE conference brings together the heads of higher education institutions from all over the country, including vice chancellors, directors and educationists, to interact on policy making in the higher education sector.
"While focusing on higher education, we also need to think of the diluting quality because of mushrooming institutes. The ministry has often done checks in such private institutions where the entire faculty is hired for a very short period to lure students," Sibal said, referring to the money minting business in the education business.
According to statistics by Ernst and Young, nearly 40 million students are expected to opt for higher education by the year 2020, compared to the current 17 million.
ONGC FPO deferred till second quarter of FY12
NEW DELHI: The government has deferred the share sale of state-owned Oil and Natural Gas Corp (ONGC) to the second half of 2011 following a faux pas in appointment of independent directors on the company board.
The government plans to sell 5 per cent, or 427.77 million equity shares, through the follow-on public offer (FPO) to raise up to Rs 12,000 crore.
"The share sale was to open on April 5, but has now been deferred. It is now likely in the second quarter of 2011-12," an official with direct knowledge of the matter said.
ONGC does not meet market regulator SEBI's listing norm of having an equal number of functional and independent directors and the government had planned to withdraw both its nominee directors on the board to push the FPO through.
But the move would have led to ONGC losing its coveted Navaratna status that gives the company board autonomy to approve an investment of any size on projects and powers to invest up to Rs 1,000 crore in a joint venture company.
According to the norms, a Navaratna board can exercise its limitless powers only when it has government-nominated directors on board. Upon withdrawal of such directors, ONGC will have to seek nod of the Public Investment Board (PIB) for any spending of over Rs 100 crore, the official said.
"The consequences of withdrawing government directors were too grave and so the it has been decided to make regular appointment of independent directors and till such time, the FPO will be deferred," he said.
A search committee will be appointed and suitable persons appointed by the Cabinet Committee on Appointment (ACC), he said adding the process may take 2-3 months.
ONGC has six functional directors, besides the chairman. It also has two government-appointed nominee directors, taking the total strength of functional/promoter directors to nine. Against this, it currently has four independent directors and needs five more to meet the SEBI's listing norm.
Sources said that last year, the ministry -- under the then minister Murli Deora -- had selected five persons, including a chartered accountant, an IIT-Mumbai professor and the CEO of private sector lender for nomination to ONGC board.
But before the names could go to the ACC, S Jaipal Reddy replaced Deora. Reddy only sent the names of the IIT professional and HDFC Managing Director Renu Sud Karnad to ACC for approval.
His logic was that since ONGC did not have a permanent chairman after the retirement of R S Sharma and the vacancies of Director (Human Resources) and Director (Exploration) were unfilled, the effective board strength was down to six and only two independent directors were needed to meet SEBI norm.
But before the ACC could approve, S V Rao was appointed Director (Exploration), taking the effective board strength to seven.
Also, it came to light that a serving executive in any company cannot be appointed as independent director on a PSU board, sources said, explaining the reasons for rejection of Karnad's candidature.
The remaining three persons chosen by the Oil Ministry also failed to meet the guidelines and so it was decided to withdraw its two government directors to bring down the effective strength to five.
The government plans to sell 5 per cent, or 427.77 million equity shares, through the follow-on public offer (FPO) to raise up to Rs 12,000 crore.
"The share sale was to open on April 5, but has now been deferred. It is now likely in the second quarter of 2011-12," an official with direct knowledge of the matter said.
ONGC does not meet market regulator SEBI's listing norm of having an equal number of functional and independent directors and the government had planned to withdraw both its nominee directors on the board to push the FPO through.
But the move would have led to ONGC losing its coveted Navaratna status that gives the company board autonomy to approve an investment of any size on projects and powers to invest up to Rs 1,000 crore in a joint venture company.
According to the norms, a Navaratna board can exercise its limitless powers only when it has government-nominated directors on board. Upon withdrawal of such directors, ONGC will have to seek nod of the Public Investment Board (PIB) for any spending of over Rs 100 crore, the official said.
"The consequences of withdrawing government directors were too grave and so the it has been decided to make regular appointment of independent directors and till such time, the FPO will be deferred," he said.
A search committee will be appointed and suitable persons appointed by the Cabinet Committee on Appointment (ACC), he said adding the process may take 2-3 months.
ONGC has six functional directors, besides the chairman. It also has two government-appointed nominee directors, taking the total strength of functional/promoter directors to nine. Against this, it currently has four independent directors and needs five more to meet the SEBI's listing norm.
Sources said that last year, the ministry -- under the then minister Murli Deora -- had selected five persons, including a chartered accountant, an IIT-Mumbai professor and the CEO of private sector lender for nomination to ONGC board.
But before the names could go to the ACC, S Jaipal Reddy replaced Deora. Reddy only sent the names of the IIT professional and HDFC Managing Director Renu Sud Karnad to ACC for approval.
His logic was that since ONGC did not have a permanent chairman after the retirement of R S Sharma and the vacancies of Director (Human Resources) and Director (Exploration) were unfilled, the effective board strength was down to six and only two independent directors were needed to meet SEBI norm.
But before the ACC could approve, S V Rao was appointed Director (Exploration), taking the effective board strength to seven.
Also, it came to light that a serving executive in any company cannot be appointed as independent director on a PSU board, sources said, explaining the reasons for rejection of Karnad's candidature.
The remaining three persons chosen by the Oil Ministry also failed to meet the guidelines and so it was decided to withdraw its two government directors to bring down the effective strength to five.
90% of BSE 500 stocks in the red this year
MUMBAI: Since the beginning of the current year, investors on Dalal Street have lost Rs 8 lakh crore. Ask any retail investor on the Street, and there is every likelihood that he has lost money. One of the main reasons for this is most retail investors invest in midcap and smallcap stocks, rather than in the frontline stocks that make up the 30-share sensex or the 50-share nifty.
Market players said the stocks that make up the BSE 500 index are the ones which are regularly traded and are also a mix of frontline as well as midcap stocks. In addition, according to BSE data, these stocks together also account for about 90% of BSE's total market capitalization.
Consider this: In 2011, of the 500 stocks that constitute the BSE 500 index, which include the sensex and nifty constituents in it, investors have made money in just 49 stocks, that is only about 10% of these 500 have given positive returns in the current year. In the remaining 451 stocks they have lost money. Seen another way, if an investor had bought 10 stocks from the basket of BSE 500, in only one stocks he would have made money, losing in the other nine.
BSE data showed that among this pack of 500, there are at least four stocks which have less than halved in value: Aqua Logistics is down 57.4% to Rs 17, Allied Digital is down 56% to Rs 83, Patel Engineering is off 53% to Rs 142 and Spicejet is down 51% to Rs 40. On the other hand, from among the stocks in which investors have made money, the top ones are Gujarat Fluorochemicals up 42% at Rs 309, Bombay Rayon Fashions up 27% at Rs 252 and Bajaj Finserv up 22% at Rs 564.
If one considers a slightly longer period, say from July 1, 2010, from this pack of 500 stocks, 320 have given negative return while in 174 stocks investors have made money. There are six stocks in this index which were listed post July 1.
On an aggregate basis, however, investors have actually made money with BSE's market capitalization now at Rs 65.2 lakh crore , compared to Rs 63.8 lakh crore then.
And the top gainers are Wockhardt, which has more than doubled to Rs 354 now, and Jindal Poly, which too have gained over 100% to Rs 426 now. On the other hand, among the top laggards are JMD Telefilms, down 87% at Rs 16, and DB Realty, off 71% at Rs 109 now.
Market players said the stocks that make up the BSE 500 index are the ones which are regularly traded and are also a mix of frontline as well as midcap stocks. In addition, according to BSE data, these stocks together also account for about 90% of BSE's total market capitalization.
Consider this: In 2011, of the 500 stocks that constitute the BSE 500 index, which include the sensex and nifty constituents in it, investors have made money in just 49 stocks, that is only about 10% of these 500 have given positive returns in the current year. In the remaining 451 stocks they have lost money. Seen another way, if an investor had bought 10 stocks from the basket of BSE 500, in only one stocks he would have made money, losing in the other nine.
BSE data showed that among this pack of 500, there are at least four stocks which have less than halved in value: Aqua Logistics is down 57.4% to Rs 17, Allied Digital is down 56% to Rs 83, Patel Engineering is off 53% to Rs 142 and Spicejet is down 51% to Rs 40. On the other hand, from among the stocks in which investors have made money, the top ones are Gujarat Fluorochemicals up 42% at Rs 309, Bombay Rayon Fashions up 27% at Rs 252 and Bajaj Finserv up 22% at Rs 564.
If one considers a slightly longer period, say from July 1, 2010, from this pack of 500 stocks, 320 have given negative return while in 174 stocks investors have made money. There are six stocks in this index which were listed post July 1.
On an aggregate basis, however, investors have actually made money with BSE's market capitalization now at Rs 65.2 lakh crore , compared to Rs 63.8 lakh crore then.
And the top gainers are Wockhardt, which has more than doubled to Rs 354 now, and Jindal Poly, which too have gained over 100% to Rs 426 now. On the other hand, among the top laggards are JMD Telefilms, down 87% at Rs 16, and DB Realty, off 71% at Rs 109 now.
Co closes big transformational deals
BANGALORE: IT Major Infosys recently closed three big transformational deals ranging between $50 million and $200 million and extending over a period of 4-5 years.
Infosys CFO V Balakrishnan said that the deals are with companies in the manufacturing, retail, and banking, financial services and insurance (BFSI) space. The customers are based in the US and Europe. Balakrishnan did not give further details citing client confidentiality.
The company expects the tally of transformational deals to touch around 15 by the end of this fiscal. Transformational deals are those that help clients in simplifying internal processes, harmonizing business processes across the enterprise, and contributes towards making organizations smarter and leaner.
Infosys, like many of its top-tier peers, is now putting a larger focus on end-to-end transformational deals owing to the structural shift in spending away from application development to system integration and consulting around enterprise application software. "Deals of this nature offer IT companies opportunities to win large multimillion dollar sized contracts, leverage on non-linearity (higher revenue per employee) and win sticky long-term contracts," added Balakrishnan.
Rather than working with IT vendors for developing customized applications, many clients now seek to implement packaged solutions such as enterprise resource planning (ERP), supply chain management and customer relationship management (CRM) suites. These packaged solutions are typically offered by software application giants such as Oracle and SAP. IT services companies offer consulting and package implementation services to integrate these solutions as per client specific requirements.
Such transformational deals have typically been the forte of international technology giants such as IBM and Accenture who have broad based technological and consulting capabilities. Indian top-tier IT companies Infosys, Wipro, TCS and HCL Technologies are increasingly vying for such deals having built their consulting capabilities over the years.
Abhishek Shindadkar, IT analyst at ICICI Securities, said that apart from the ability to manage complex transformational projects, transformational deals require consulting skills and strong domain knowledge.
Balakrishnan said that the company is focusing on more such deals by developing its consulting capability. "We have a 600 member consulting team which we are looking to strengthen further. Acquisitions is one route that we are seeking," he added.
Analysts see Infosys's failed bid to acquire British consulting firm Axon Group in 2008 as a huge missed opportunity. HCL Technology which eventually went on to buy the company today has a strong consulting practice. HCLT, thanks to Axon, is said to have the most number of solutions accredited by SAP.
According to a recent report by brokerage firm Motilal Oswal, the new license sales at SAP and Oracle have been growing at a steady rate in recent times. This is expected to drive the package implementation revenues for Indian IT companies with a lag of a couple of quarters.
The consulting & package implementation service contributed around 26% of the overall revenues of Infosys in the previous quarter, registering a 38% annual growth. At the same time, the application development & management business, which contributed 38% of the company's revenues, grew by just 11% last quarter.
Infosys CFO V Balakrishnan said that the deals are with companies in the manufacturing, retail, and banking, financial services and insurance (BFSI) space. The customers are based in the US and Europe. Balakrishnan did not give further details citing client confidentiality.
The company expects the tally of transformational deals to touch around 15 by the end of this fiscal. Transformational deals are those that help clients in simplifying internal processes, harmonizing business processes across the enterprise, and contributes towards making organizations smarter and leaner.
Infosys, like many of its top-tier peers, is now putting a larger focus on end-to-end transformational deals owing to the structural shift in spending away from application development to system integration and consulting around enterprise application software. "Deals of this nature offer IT companies opportunities to win large multimillion dollar sized contracts, leverage on non-linearity (higher revenue per employee) and win sticky long-term contracts," added Balakrishnan.
Rather than working with IT vendors for developing customized applications, many clients now seek to implement packaged solutions such as enterprise resource planning (ERP), supply chain management and customer relationship management (CRM) suites. These packaged solutions are typically offered by software application giants such as Oracle and SAP. IT services companies offer consulting and package implementation services to integrate these solutions as per client specific requirements.
Such transformational deals have typically been the forte of international technology giants such as IBM and Accenture who have broad based technological and consulting capabilities. Indian top-tier IT companies Infosys, Wipro, TCS and HCL Technologies are increasingly vying for such deals having built their consulting capabilities over the years.
Abhishek Shindadkar, IT analyst at ICICI Securities, said that apart from the ability to manage complex transformational projects, transformational deals require consulting skills and strong domain knowledge.
Balakrishnan said that the company is focusing on more such deals by developing its consulting capability. "We have a 600 member consulting team which we are looking to strengthen further. Acquisitions is one route that we are seeking," he added.
Analysts see Infosys's failed bid to acquire British consulting firm Axon Group in 2008 as a huge missed opportunity. HCL Technology which eventually went on to buy the company today has a strong consulting practice. HCLT, thanks to Axon, is said to have the most number of solutions accredited by SAP.
According to a recent report by brokerage firm Motilal Oswal, the new license sales at SAP and Oracle have been growing at a steady rate in recent times. This is expected to drive the package implementation revenues for Indian IT companies with a lag of a couple of quarters.
The consulting & package implementation service contributed around 26% of the overall revenues of Infosys in the previous quarter, registering a 38% annual growth. At the same time, the application development & management business, which contributed 38% of the company's revenues, grew by just 11% last quarter.
Hero Honda goes for brand makeover
CHENNAI: Fresh from the split with Honda Motors, the Hero Group is looking to reinvent itself with a new brand identity and has kicked off a rebranding exercise. London-based Wolff Olins, part of the Omnicom group, is working on the new brand identity, including the brand architecture, brand name, brand logo and brand positioning.
The country's leading two-wheeler company wants a new brand name after the two joint venture partners of the Hero Honda Motors (HHML)-the Hero Group of India and Honda Motor Co of Japan-signed an agreement recently. The Hero Group has just concluded a buyout of Honda's stake in the company.
"Our country is undergoing phenomenal socio-economic change and is emerging as one of the epicenters of global business. The new buzzwords at Hero Honda are Creation, Renewal and Re-energizing," said Pawan Munjal, MD-CEO of Hero Honda. "The world today is looking at India not just for its sustained GDP growth or the spending power of its strong middle-class, but also for its intellectual capital, enterprise and entrepreneurship. Brand India keeps getting stronger."
The new brand image of the Munjals' flagship could represent the "Indianess" of the company. "This rebranding has come at a crucial time, given the disengagement with Honda. The route that brands normally take would be to take any mnemonic that resonates with their identity and build on that. Like the colour red with Airtel," said Ramanujam Sridhar, CEO of BrandComm. "Hero could build on the Indianess of their brand and their knowledge of Indian conditions for their new identity."
Others believe that the Hero could don the 'desi' tag strongly in its new avatar. "While Indianess should be celebrated, a desi branding imagery is a bullet that not too many are willing to bite into just yet," Harish Bijoor, branding expert said.
"Hero Honda without Honda is a kind of a vacuum point since entire generations have grown up on Hero Honda. But the split is reasonably cathartic and this is an opportunity for Hero to reinvent and resonate with the zing and buzz of the youth. For them a motorcycle is not just a vehicle, but a symbol of empowerment."
The country's leading two-wheeler company wants a new brand name after the two joint venture partners of the Hero Honda Motors (HHML)-the Hero Group of India and Honda Motor Co of Japan-signed an agreement recently. The Hero Group has just concluded a buyout of Honda's stake in the company.
"Our country is undergoing phenomenal socio-economic change and is emerging as one of the epicenters of global business. The new buzzwords at Hero Honda are Creation, Renewal and Re-energizing," said Pawan Munjal, MD-CEO of Hero Honda. "The world today is looking at India not just for its sustained GDP growth or the spending power of its strong middle-class, but also for its intellectual capital, enterprise and entrepreneurship. Brand India keeps getting stronger."
The new brand image of the Munjals' flagship could represent the "Indianess" of the company. "This rebranding has come at a crucial time, given the disengagement with Honda. The route that brands normally take would be to take any mnemonic that resonates with their identity and build on that. Like the colour red with Airtel," said Ramanujam Sridhar, CEO of BrandComm. "Hero could build on the Indianess of their brand and their knowledge of Indian conditions for their new identity."
Others believe that the Hero could don the 'desi' tag strongly in its new avatar. "While Indianess should be celebrated, a desi branding imagery is a bullet that not too many are willing to bite into just yet," Harish Bijoor, branding expert said.
"Hero Honda without Honda is a kind of a vacuum point since entire generations have grown up on Hero Honda. But the split is reasonably cathartic and this is an opportunity for Hero to reinvent and resonate with the zing and buzz of the youth. For them a motorcycle is not just a vehicle, but a symbol of empowerment."
Sensex drops by 142 pts on weak global cues
Cutting short the two-day gaining streak, the BSE benchmark Sensex on Thursday fell by 142 points due to selling by funds as rising crude oil prices sparked fears of interest rate hike amid a weakening global trend. The 30-share barometer fell by 141.97 points to 18,327.98 points. The inde
x had gained 247 points in the last two trading sessions.
Similarly, the broad-based National Stock Exchange index Nifty dropped by 36.60 points to 5,494.40 points.
Global stock markets declined on renewed concern about the euro debt crisis and rising crude oil prices that might curb global economic growth.
Banking and metal stocks fell on fears that easing food inflation might be temporary and the Reserve Bank of India might further hike interest rate in its policy meeting next week.
The food inflation fell to 9.52 % for the week ended February 26 from 10.39 % in the previous week.
Crude oil climbed as escalating violence in Libya, Africa's third-largest producer, renewed concern that supply disruptions may spread in the Middle East.
Marketmen said the investor confidence remained jittery on fears of more tightening measures to stablise economic growth in the RBI policy review scheduled next week.
The financial company stocks remained under pressure and suffered the most as the government has increased its repurchase rate seven times in the past year to 6.5 % to stem inflation.
The Sensex has lost 13 % from its record level on November 5, making it the world’s third-worst performing benchmark index on concern government measures to quell inflation will hurt economic growth.
The banking index fell by 1.16 % to 12,313.14 as stocks of SBI, ICICI Bank and HDFC Bank declined.
The metal index dropped by 1.30 % to 15,666.92 followed by Teck index by 0.54 % to 3,656.65. IT index lost 0.53 % to 6,242.98, consumer durable index by 0.53 % to 5,760.96 and FMCG index 0.46 % to 3,490.64.
As the selling pressure spread over a wide-front, smallcap index lost 0.25 % to 7,989.69 and midcap index by 0.07 % to 6,599.79.
x had gained 247 points in the last two trading sessions.
Similarly, the broad-based National Stock Exchange index Nifty dropped by 36.60 points to 5,494.40 points.
Global stock markets declined on renewed concern about the euro debt crisis and rising crude oil prices that might curb global economic growth.
Banking and metal stocks fell on fears that easing food inflation might be temporary and the Reserve Bank of India might further hike interest rate in its policy meeting next week.
The food inflation fell to 9.52 % for the week ended February 26 from 10.39 % in the previous week.
Crude oil climbed as escalating violence in Libya, Africa's third-largest producer, renewed concern that supply disruptions may spread in the Middle East.
Marketmen said the investor confidence remained jittery on fears of more tightening measures to stablise economic growth in the RBI policy review scheduled next week.
The financial company stocks remained under pressure and suffered the most as the government has increased its repurchase rate seven times in the past year to 6.5 % to stem inflation.
The Sensex has lost 13 % from its record level on November 5, making it the world’s third-worst performing benchmark index on concern government measures to quell inflation will hurt economic growth.
The banking index fell by 1.16 % to 12,313.14 as stocks of SBI, ICICI Bank and HDFC Bank declined.
The metal index dropped by 1.30 % to 15,666.92 followed by Teck index by 0.54 % to 3,656.65. IT index lost 0.53 % to 6,242.98, consumer durable index by 0.53 % to 5,760.96 and FMCG index 0.46 % to 3,490.64.
As the selling pressure spread over a wide-front, smallcap index lost 0.25 % to 7,989.69 and midcap index by 0.07 % to 6,599.79.
Irda seeks greater disclosure on NAV-guaranteed products
Concerned over the rampant mis-selling of guaranteed products — especially net asset value (NAV) ones — of life insurance companies, the Insurance Regulatory Development Authority (Irda) is pushing for greater disclosure on these products.
“The data must be provided separately for NAV-guaranteed and other products (both for existing and withdrawn), which are in your books as of December 31, 2010,” the regulator said in a letter written to all life insurers.
The specific data the regulator has asked for include the name of the products, fund size, premium and the number of polices for all guaranteed linked and non-linked products, among others.
“Since these products are complex in nature, we are seeking more disclosures from the insurance companies. We believe there should be more disclosures to the policy holders as well,” said a senior Irda official.
“We are working on devising new disclosure norms for such products,” he added.
Industry sources said the regulator might come up with additional disclosure norms to check mis-selling of products by agents. “Irda is looking at how are these funds are sold,” a life insurance official said.
These policies guarantee payouts on the basis of the highest NAV over the first seven years. However, for regular unit-linked insurance products (Ulips), NAV at the time of maturity determines the actual payout.
NAV is the ratio between the prevailing market value of a fund’s net assets and the number of outstanding shares.
To offer such guarantees, Irda mandates insurers to make an extra provision, over and above the prescribed solvency requirement, by way of extra reserves. Most firms set aside 0.5-1 per cent of investments as reserves.
Unlike other products, where it has to be approved by the actuarial and life departments, guaranteed products have to get additional approval from the finance department.
Life Insurance Corporation (LIC) of India collected around Rs 15,000 crore from Wealth Plus, its guaranteed NAV product. Samridhi Plus, another guaranteed product, collected Rs 300 core within the first 20 days of its launch.
“The data must be provided separately for NAV-guaranteed and other products (both for existing and withdrawn), which are in your books as of December 31, 2010,” the regulator said in a letter written to all life insurers.
The specific data the regulator has asked for include the name of the products, fund size, premium and the number of polices for all guaranteed linked and non-linked products, among others.
“Since these products are complex in nature, we are seeking more disclosures from the insurance companies. We believe there should be more disclosures to the policy holders as well,” said a senior Irda official.
“We are working on devising new disclosure norms for such products,” he added.
Industry sources said the regulator might come up with additional disclosure norms to check mis-selling of products by agents. “Irda is looking at how are these funds are sold,” a life insurance official said.
These policies guarantee payouts on the basis of the highest NAV over the first seven years. However, for regular unit-linked insurance products (Ulips), NAV at the time of maturity determines the actual payout.
NAV is the ratio between the prevailing market value of a fund’s net assets and the number of outstanding shares.
To offer such guarantees, Irda mandates insurers to make an extra provision, over and above the prescribed solvency requirement, by way of extra reserves. Most firms set aside 0.5-1 per cent of investments as reserves.
Unlike other products, where it has to be approved by the actuarial and life departments, guaranteed products have to get additional approval from the finance department.
Life Insurance Corporation (LIC) of India collected around Rs 15,000 crore from Wealth Plus, its guaranteed NAV product. Samridhi Plus, another guaranteed product, collected Rs 300 core within the first 20 days of its launch.
Performance may get Sebi retirees an extension
Bureaucrats and capital market veterans wanting to become whole-time members of the Securities and Exchange Board of India (Sebi) might have to wait longer than expected. While there are still some months left before two of the three members retire, the industry is already abuzz with talk that they might get an extension.
The three-year term of two whole-time members, M S Sahoo and K M Abraham, will end this July. Both were appointed by the Central government in 2008. While the appointment is for three years, the government can give an extension.
According to sources, the ministry of finance is satisfied with Sebi’s functioning in the past two years, and is not in a mood to revamp the brass in one go. U K Sinha was appointed chairman only last month and it is believed two new members in such a situation isn’t desirable.
Things will be cleared by the end of this month, as the selection process, if initiated, has to be begin three to four months before a term ends. The selection process of a whole-time member is similar to that of a chairman, with the final nod coming from a Cabinet committee.
“If one looks at the last few years, Sebi has come out with some of the biggest orders against high-flying corporate entities,” said a person on condition of anonymity. “It is widely said that the quality of Sebi orders and investigations has improved after Sahoo and Abraham came on board. Also, some of the initiatives taken to improve market efficiency have not gone unnoticed.”
Sahoo is in overall charge of derivatives and new products, legal affairs, enforcement and regulation, and supervision of market intermediaries. He shares a rapport with Sinha, having worked together at the finance ministry. Abraham handles corporate finance, investigations, vigilance and integrated surveillance, among other things. The third member, Prashant Saran, assumed office in May 2009.
The work done by the two members has definitely caught the attention of bureaucratic circles of Delhi. According to a person privy to the developments, at a recent conclave of bureaucrats, some actions of the Sebi members were discussed with great appreciation.
“The conclave was attended by over 20 IAS (Indian Administrative Services) officers of joint secretary and director level. Everyone kept talking about Sebi’s good work in the last couple of years. The sense that one got was that the two members would get an extension, though there are many eyeing that position,” said this person, who attended the conclave.
Interestingly, G Anantharaman is the only former whole-time member who has the distinction of spending more than three years at Sebi, having worked with the regulator from December 2004 to March 2008. He was appreciated for his investigations and orders related to disgorgement and the IPO irregularities scam.
The three-year term of two whole-time members, M S Sahoo and K M Abraham, will end this July. Both were appointed by the Central government in 2008. While the appointment is for three years, the government can give an extension.
According to sources, the ministry of finance is satisfied with Sebi’s functioning in the past two years, and is not in a mood to revamp the brass in one go. U K Sinha was appointed chairman only last month and it is believed two new members in such a situation isn’t desirable.
Things will be cleared by the end of this month, as the selection process, if initiated, has to be begin three to four months before a term ends. The selection process of a whole-time member is similar to that of a chairman, with the final nod coming from a Cabinet committee.
“If one looks at the last few years, Sebi has come out with some of the biggest orders against high-flying corporate entities,” said a person on condition of anonymity. “It is widely said that the quality of Sebi orders and investigations has improved after Sahoo and Abraham came on board. Also, some of the initiatives taken to improve market efficiency have not gone unnoticed.”
Sahoo is in overall charge of derivatives and new products, legal affairs, enforcement and regulation, and supervision of market intermediaries. He shares a rapport with Sinha, having worked together at the finance ministry. Abraham handles corporate finance, investigations, vigilance and integrated surveillance, among other things. The third member, Prashant Saran, assumed office in May 2009.
The work done by the two members has definitely caught the attention of bureaucratic circles of Delhi. According to a person privy to the developments, at a recent conclave of bureaucrats, some actions of the Sebi members were discussed with great appreciation.
“The conclave was attended by over 20 IAS (Indian Administrative Services) officers of joint secretary and director level. Everyone kept talking about Sebi’s good work in the last couple of years. The sense that one got was that the two members would get an extension, though there are many eyeing that position,” said this person, who attended the conclave.
Interestingly, G Anantharaman is the only former whole-time member who has the distinction of spending more than three years at Sebi, having worked with the regulator from December 2004 to March 2008. He was appreciated for his investigations and orders related to disgorgement and the IPO irregularities scam.
Wednesday, March 9, 2011
Demand for more funds to agriculture, education sectors
NEW DELHI: More emphasis on investment in agriculture, increasing expenditure on education and tackling price rise were some of the demands made by members in the Lok Sabha today during the discussion on the General budget for 2011-12.
Supriya Sule (NCP) hailed the budget but said crop loans given to farmers were not sufficient as it took care of only 40 per cent of the total cost involved in raising a crop. She wanted the government to give more subsidies.
She suggested that export of surplus cotton and sugar should be permitted.
"120 lakh tonne bale of cotton produced in India is not used. Similarly, 20 lakh tonne of sugar is surplus. This should be exported," Sule said.
She also demanded tax relief to urban cooperative banks. Nishikant Dubey (BJP) said the government had not done enough in the budget for its three target segments of youth, minority and women.
He maintained that the government had removed all subsidies for the minority community, while for women it had only increased the remuneration for anganwadi workers.
Dubey said the government should increase expenditure on education to 6 per cent from the present 3.39 per cent of GDP as recommended by the Kothari Commission.
He demanded increase in expenditure on agriculture. "You are fudging the budget somewhere," he alleged, adding that manipulation is being done everyday in the functioning of SEBI.
Dubey said government should not open the insurance sector to FDI from 26 per cent to 49 per cent.
K Suresh (Cong) demanded a metro rail for Kochi and an IIT for Kerala. He also demanded setting up of a cashew board, a long-standing request from Kerala.
Baliram (BSP) described the budget as "directionless, disappointing and one which drives the poor to tears".
"No special provisions have been made for the poor which could end their hunger and poverty," he said, adding foodgrains are rotting in godowns while people are hungry.
He said Indian black money stashed abroad should be brought back.
Namo Nageshwar Rao (TDP) said according to the Economic Survey, India is the 5th most indebted country in the world. He alleged that the government was "mesmerising" people that the country is doing well.
"There should be an agriculture budget. 25 per cent of the GDP should come from agriculture," he said.
Shivkumar Udasi (BJP) said the net income of farmers is much less than that of government servants. He demanded abolition of MPLAD fund.
Supriya Sule (NCP) hailed the budget but said crop loans given to farmers were not sufficient as it took care of only 40 per cent of the total cost involved in raising a crop. She wanted the government to give more subsidies.
She suggested that export of surplus cotton and sugar should be permitted.
"120 lakh tonne bale of cotton produced in India is not used. Similarly, 20 lakh tonne of sugar is surplus. This should be exported," Sule said.
She also demanded tax relief to urban cooperative banks. Nishikant Dubey (BJP) said the government had not done enough in the budget for its three target segments of youth, minority and women.
He maintained that the government had removed all subsidies for the minority community, while for women it had only increased the remuneration for anganwadi workers.
Dubey said the government should increase expenditure on education to 6 per cent from the present 3.39 per cent of GDP as recommended by the Kothari Commission.
He demanded increase in expenditure on agriculture. "You are fudging the budget somewhere," he alleged, adding that manipulation is being done everyday in the functioning of SEBI.
Dubey said government should not open the insurance sector to FDI from 26 per cent to 49 per cent.
K Suresh (Cong) demanded a metro rail for Kochi and an IIT for Kerala. He also demanded setting up of a cashew board, a long-standing request from Kerala.
Baliram (BSP) described the budget as "directionless, disappointing and one which drives the poor to tears".
"No special provisions have been made for the poor which could end their hunger and poverty," he said, adding foodgrains are rotting in godowns while people are hungry.
He said Indian black money stashed abroad should be brought back.
Namo Nageshwar Rao (TDP) said according to the Economic Survey, India is the 5th most indebted country in the world. He alleged that the government was "mesmerising" people that the country is doing well.
"There should be an agriculture budget. 25 per cent of the GDP should come from agriculture," he said.
Shivkumar Udasi (BJP) said the net income of farmers is much less than that of government servants. He demanded abolition of MPLAD fund.
Indian cos' GDR plans stalled by hedge funds, Libyan crisis
BANGALORE & MUMBAI: Indian companies' plans to raise more than a billion dollars by selling Global Depositary Receipts, or GDRs, has been stalled due to overseas investors pulling out funds from emerging markets and some prominent ones, such as Jim Rogers , even shorting these stocks.
Kingfisher Airlines, Empee Sugar, Jindal Stainless and Orbit Corporation are among the companies that have put on hold plans to raise funds overseas.
Soaring prices of crude oil and commodities could take the sheen out of emerging markets like India as they battle inflation with higher interest, which cuts corporate earnings.
"Short positions by hedge funds indicate there are still some downward corrections likely in emerging markets. Potential investors for Indian GDRs would now stay away from upcoming issues," said Gautam Chand of Instanex Capital , which tracks Indian GDRs.
After peaking at 1,600 crore in August 2009, capital raised by Indian corporates through GDRs slumped to 110 crore in November 2010.
Overseas investors have turned jittery after the recent Libyan crisis, coupled with a substantial decline in local shares.
As a result, Kingfisher Airlines' $250-million GDR issue has again been delayed, said a UB group official. Roadshows had closed last month and arrangers were working on the pricing to float the issue this month.
A source familiar with the group said the company had targeted a minimum conversion price of 80 per share. Last week, the stock tanked to 38. On Wednesday, it rose 0.7% to 41.
A Kingfisher Airlines spokesperson declined comment.
"GDRs are an absolute no these days,'' says Raj Bhatt, vice-chairman and chief executive of Elara Capital . "Both the local market correction and Arab crisis have impacted sentiments in both the local and international markets, making it tough for promoters to raise cash from the international markets."
Now, overseas investors are finding only convertible bonds floated by local infrastructure companies or special purpose vehicles interesting, he said.
Chennai-based Empee Sugar had plans to raise 350 crore to part-finance its distillery unit expansion. A company official said it's going slow on the plan due to the adverse market conditions.
Instability in the Middle East could prolong the bearish trend, making it tough for fund raising plans abroad.
Investors pulled out of emerging-market funds for the sixth week with redemptions of $2.5 billion in the week ended March 2. It may rise with Chinese premier Wen Jiabo committing to tame inflation to prevent social unrest.
Pujit Aggarwal, managing director of Orbit Corporation, said it would be some time before the company approaches global investors for equity funds.
A senior banker advising at least two Indian companies on their proposed GDRs said such issuances are unlikely to "go through" in the near-term. "Even QIPs (local share sale to institutional investors) are out of the question," he said.
Dhananjay Sinha, senior VP, strategist & economist, Centrum Broking, said the downtrend in GDRs seems to have a direct co-relation with foreign direct investment (FDI) inflows. He noted that FDI inflows have been declining since last year; capital raised through GDRs/ADRs also had been declining since mid-2009.
Kingfisher Airlines, Empee Sugar, Jindal Stainless and Orbit Corporation are among the companies that have put on hold plans to raise funds overseas.
Soaring prices of crude oil and commodities could take the sheen out of emerging markets like India as they battle inflation with higher interest, which cuts corporate earnings.
"Short positions by hedge funds indicate there are still some downward corrections likely in emerging markets. Potential investors for Indian GDRs would now stay away from upcoming issues," said Gautam Chand of Instanex Capital , which tracks Indian GDRs.
After peaking at 1,600 crore in August 2009, capital raised by Indian corporates through GDRs slumped to 110 crore in November 2010.
Overseas investors have turned jittery after the recent Libyan crisis, coupled with a substantial decline in local shares.
As a result, Kingfisher Airlines' $250-million GDR issue has again been delayed, said a UB group official. Roadshows had closed last month and arrangers were working on the pricing to float the issue this month.
A source familiar with the group said the company had targeted a minimum conversion price of 80 per share. Last week, the stock tanked to 38. On Wednesday, it rose 0.7% to 41.
A Kingfisher Airlines spokesperson declined comment.
"GDRs are an absolute no these days,'' says Raj Bhatt, vice-chairman and chief executive of Elara Capital . "Both the local market correction and Arab crisis have impacted sentiments in both the local and international markets, making it tough for promoters to raise cash from the international markets."
Now, overseas investors are finding only convertible bonds floated by local infrastructure companies or special purpose vehicles interesting, he said.
Chennai-based Empee Sugar had plans to raise 350 crore to part-finance its distillery unit expansion. A company official said it's going slow on the plan due to the adverse market conditions.
Instability in the Middle East could prolong the bearish trend, making it tough for fund raising plans abroad.
Investors pulled out of emerging-market funds for the sixth week with redemptions of $2.5 billion in the week ended March 2. It may rise with Chinese premier Wen Jiabo committing to tame inflation to prevent social unrest.
Pujit Aggarwal, managing director of Orbit Corporation, said it would be some time before the company approaches global investors for equity funds.
A senior banker advising at least two Indian companies on their proposed GDRs said such issuances are unlikely to "go through" in the near-term. "Even QIPs (local share sale to institutional investors) are out of the question," he said.
Dhananjay Sinha, senior VP, strategist & economist, Centrum Broking, said the downtrend in GDRs seems to have a direct co-relation with foreign direct investment (FDI) inflows. He noted that FDI inflows have been declining since last year; capital raised through GDRs/ADRs also had been declining since mid-2009.
Elite takes sides as Gupta fights SEC charges
Rajat Gupta was McKinsey’s global managing director until 2003. He also served on the boards of Goldman Sachs and Procter & Gamble
At the January 2010 birthday party of Henry Kravis, the founder of private equity firm Kohlberg Kravis Roberts, Rajat Gupta was in a sombre mood.
While Mr Kravis was enthusiastically recounting tales of a temple tour in southern India to a Delhi drawing room, a brooding Mr Gupta was publicly reflecting on charges of insider trading in the US levelled at Anil Kumar, a close, senior Delhi-based associate at McKinsey, the consultants.
Few of the senior businesspeople in the room, many of them donors to a northern Indian expansion of the Indian School of Business (ISB), had any idea that the suspicion of insider trading surrounding the New York-based Galleon Group hedge fund could in time envelop Mr Gupta himself.
Born in Calcutta and schooled in New Delhi, Mr Gupta was widely revered in Indian business circles as a man who had scaled the heights of corporate America by becoming McKinsey’s global managing director.
He was India’s foremost private sector global operator and attracted many acolytes among India’s successful entrepreneurs keen to have the shine of McKinsey’s prestige and intellectual prowess rub off on them.
Mr Gupta ran McKinsey for almost a decade until 2003 and remained on its partnership board until 2007.
Abroad, he enjoyed the company of Microsoft’s Bill Gates, General Electric’s Jeff Immelt and the Clintons.
At home, he had an open door to prime minister Manmohan Singh’s office and was thick with the country’s most powerful business leaders.
They included Mukesh Ambani, the chairman of Reliance Industries; KP Singh, the chairman of property developer DLF; Sunil Bharti Mittal, chairman of Airtel; and Hari Bhartia, the current president of the Confederation of Indian Industry.
However, Mr Gupta now faces civil insider trading charges for allegedly sharing secret information he learnt as a board member of Goldman Sachs and Procter & Gamble with Galleon Group founder Raj Rajaratnam. Mr Gupta’s lawyer has called the charges “baseless” and insisted his client did nothing wrong.
The immediate reaction of many of Mr Gupta’s business associates in India to the charges, brought by the US Securities and Exchange Commission at the beginning of March, has been shock, followed by a mix of denial and disappointment.
His supporters, notably at ISB and McKinsey, have strenuously rallied to a man whose standing was unrivalled as one of India’s biggest names.
As the trial on insider trading charges of Mr Rajaratnam gets under way in New York this week, Mr Gupta’s supporters feel sure that, whether he is called to testify in that case or not, his denials of wrongdoing will be vindicated.
Mr Kumar has pleaded guilty to insider trading charges and is expected to testify against Mr Rajaratnam.
For all his towering local reputation, Mr Gupta is not without critics in India.
They say Mr Gupta worked with Mr Kumar to corner private and government business and gain favour in Asia’s third-largest economy.
The two operated as a forceful double-act to secure business for McKinsey, win access in Washington and build a brotherhood of donors around the Hyderabad-based ISB and a handful of social initiatives.
“They had created a kind of hustling that was almost unimaginable,” says Suhel Seth, managing partner of Delhi-based advisory business Counselage.
“They were the face of McKinsey in India. They used McKinsey as a calling card to enter and then it allowed them to do things to claim that they were the disseminators of ‘Brand India’ around the globe.”
Mr Gupta’s counsel in the US said in response: “Mr Gupta’s 40-year record of ethical conduct, integrity and commitment to guarding his clients’ confidences is beyond reproach.”
A senior Indian corruption investigator said that in his view Mr Gupta’s credibility would “take a bashing” regardless of the legal outcome.
He also said the furore surrounding such a prominent Indian business leader would reflect badly on the perception of India as a whole. “Unfortunately he’s an Indian. This will affect global Indian standards,” he said.
Mr Gupta has already left the Goldman Sachs board and is stepping down from other company boards, including that of outsourcing group Genpact.
His travails in the US come at an awkward time for Mr Singh and the ruling Congress party, already battling a tide of high profile corruption scandals including allegations that $39bn was lost in national revenues as a result of the flawed award of 2G telecoms licences.
One veteran Mumbai-based businessman familiar with Mr Gupta’s work said: “Everyone’s completely stunned because Rajat’s reputation in India is very strong. If you took the top 150 businessmen, politicians – he knew them all. [The alleged insider trading] doesn’t fit with his image.”
Gurcharan Das, the former chief executive of Procter & Gamble India, a company on whose global board Mr Gupta sat until last week, said the speed of the US judicial system would hold a mirror up to India’s own courts, where the slow passage of justice is notorious.
“It’s a bit of a disappointment when one of your heroes has fallen,” he said.
At the January 2010 birthday party of Henry Kravis, the founder of private equity firm Kohlberg Kravis Roberts, Rajat Gupta was in a sombre mood.
While Mr Kravis was enthusiastically recounting tales of a temple tour in southern India to a Delhi drawing room, a brooding Mr Gupta was publicly reflecting on charges of insider trading in the US levelled at Anil Kumar, a close, senior Delhi-based associate at McKinsey, the consultants.
Few of the senior businesspeople in the room, many of them donors to a northern Indian expansion of the Indian School of Business (ISB), had any idea that the suspicion of insider trading surrounding the New York-based Galleon Group hedge fund could in time envelop Mr Gupta himself.
Born in Calcutta and schooled in New Delhi, Mr Gupta was widely revered in Indian business circles as a man who had scaled the heights of corporate America by becoming McKinsey’s global managing director.
He was India’s foremost private sector global operator and attracted many acolytes among India’s successful entrepreneurs keen to have the shine of McKinsey’s prestige and intellectual prowess rub off on them.
Mr Gupta ran McKinsey for almost a decade until 2003 and remained on its partnership board until 2007.
Abroad, he enjoyed the company of Microsoft’s Bill Gates, General Electric’s Jeff Immelt and the Clintons.
At home, he had an open door to prime minister Manmohan Singh’s office and was thick with the country’s most powerful business leaders.
They included Mukesh Ambani, the chairman of Reliance Industries; KP Singh, the chairman of property developer DLF; Sunil Bharti Mittal, chairman of Airtel; and Hari Bhartia, the current president of the Confederation of Indian Industry.
However, Mr Gupta now faces civil insider trading charges for allegedly sharing secret information he learnt as a board member of Goldman Sachs and Procter & Gamble with Galleon Group founder Raj Rajaratnam. Mr Gupta’s lawyer has called the charges “baseless” and insisted his client did nothing wrong.
The immediate reaction of many of Mr Gupta’s business associates in India to the charges, brought by the US Securities and Exchange Commission at the beginning of March, has been shock, followed by a mix of denial and disappointment.
His supporters, notably at ISB and McKinsey, have strenuously rallied to a man whose standing was unrivalled as one of India’s biggest names.
As the trial on insider trading charges of Mr Rajaratnam gets under way in New York this week, Mr Gupta’s supporters feel sure that, whether he is called to testify in that case or not, his denials of wrongdoing will be vindicated.
Mr Kumar has pleaded guilty to insider trading charges and is expected to testify against Mr Rajaratnam.
For all his towering local reputation, Mr Gupta is not without critics in India.
They say Mr Gupta worked with Mr Kumar to corner private and government business and gain favour in Asia’s third-largest economy.
The two operated as a forceful double-act to secure business for McKinsey, win access in Washington and build a brotherhood of donors around the Hyderabad-based ISB and a handful of social initiatives.
“They had created a kind of hustling that was almost unimaginable,” says Suhel Seth, managing partner of Delhi-based advisory business Counselage.
“They were the face of McKinsey in India. They used McKinsey as a calling card to enter and then it allowed them to do things to claim that they were the disseminators of ‘Brand India’ around the globe.”
Mr Gupta’s counsel in the US said in response: “Mr Gupta’s 40-year record of ethical conduct, integrity and commitment to guarding his clients’ confidences is beyond reproach.”
A senior Indian corruption investigator said that in his view Mr Gupta’s credibility would “take a bashing” regardless of the legal outcome.
He also said the furore surrounding such a prominent Indian business leader would reflect badly on the perception of India as a whole. “Unfortunately he’s an Indian. This will affect global Indian standards,” he said.
Mr Gupta has already left the Goldman Sachs board and is stepping down from other company boards, including that of outsourcing group Genpact.
His travails in the US come at an awkward time for Mr Singh and the ruling Congress party, already battling a tide of high profile corruption scandals including allegations that $39bn was lost in national revenues as a result of the flawed award of 2G telecoms licences.
One veteran Mumbai-based businessman familiar with Mr Gupta’s work said: “Everyone’s completely stunned because Rajat’s reputation in India is very strong. If you took the top 150 businessmen, politicians – he knew them all. [The alleged insider trading] doesn’t fit with his image.”
Gurcharan Das, the former chief executive of Procter & Gamble India, a company on whose global board Mr Gupta sat until last week, said the speed of the US judicial system would hold a mirror up to India’s own courts, where the slow passage of justice is notorious.
“It’s a bit of a disappointment when one of your heroes has fallen,” he said.
Sebi changes norms on use of MF funds
MUMBAI: In order to bring in some uniformity in usage of funds that had accrued to mutual fund houses before entry load was abolished in August 2009, market regulator Sebi on Wednesday said fund houses can use only one-third of the money collected prior to the ban in a particular financial year. The Sebi directive relates only to funds that had accrued to MFs before entry loads were done away with, and fund houses were at liberty to decide how they want to use the funds accrued to them since August 1, 2009.
Before the ban came into effect, MF agents and distributors used to get up to 2.5% of the invested amount as commission from fund houses, called entry-load, when they sold MF units to investors. At present, fund houses are allowed to charge investors an amount only during the time of redemption, called exit load.
"It is essential to bring about uniformity in usage of load balances," a Sebi circular said. So in effect, from now on, the load account balances of fund houses would have two parts, one which will reflect the balance as on July 31, 2009, and the second the accretions since August 2009.
"The unutilized balances can be carried forward, yet in no financial year the total spending can be more than one-third of the load balances on July 31, 2009," Sebi said. Fund houses can use the balances in load accounts to meet marketing and selling expenses, including commissions paid to agents and distributors.
Before the ban came into effect, MF agents and distributors used to get up to 2.5% of the invested amount as commission from fund houses, called entry-load, when they sold MF units to investors. At present, fund houses are allowed to charge investors an amount only during the time of redemption, called exit load.
"It is essential to bring about uniformity in usage of load balances," a Sebi circular said. So in effect, from now on, the load account balances of fund houses would have two parts, one which will reflect the balance as on July 31, 2009, and the second the accretions since August 2009.
"The unutilized balances can be carried forward, yet in no financial year the total spending can be more than one-third of the load balances on July 31, 2009," Sebi said. Fund houses can use the balances in load accounts to meet marketing and selling expenses, including commissions paid to agents and distributors.
US stocks fall further as oil rises
NEW YORK: US stocks hit session lows on Wednesday as Brent and U.S. crude prices spiked following data that showed gasoline and distillate inventories fell much more than forecast last week.
Oil was already rising earlier as fighting intensified in Libya and an OPEC delegate said the group saw no need to hold an emergency meeting to consider raising production.
The Dow Jones industrial average dropped 31.41 points, or 0.26 percent, to 12,182.97. The Standard & Poor's 500 fell 6.86 points, or 0.52 percent, to 1,314.96. The Nasdaq Composite lost 19.52 points, or 0.71 percent, to 2,746.25.
Oil was already rising earlier as fighting intensified in Libya and an OPEC delegate said the group saw no need to hold an emergency meeting to consider raising production.
The Dow Jones industrial average dropped 31.41 points, or 0.26 percent, to 12,182.97. The Standard & Poor's 500 fell 6.86 points, or 0.52 percent, to 1,314.96. The Nasdaq Composite lost 19.52 points, or 0.71 percent, to 2,746.25.
NHAI eases qualification guidelines
NEW DELHI: In what could come as a major relief to highway developers, NHAI has notified the new request for annual qualification ( RFAQ) for bidders. Instead of submitting bulky documents every time for different highway projects, they will now be qualified for one calendar year. As per notification, the applicant has to indicate the estimated project cost for which he wishes to get pre-qualified for entire year. This will reduce burden of developers and will also leave no scope for disqualifying developers on frivolous grounds.
The authority proposes to award projects for two/four and six laning of about 10,000 National Highways in the next one year. The step has been taken to streamline and ease the process of pre-qualification of applicants for participating in the bid process of individual projects. As per the new norms, the applications can be submitted as single entity or consortium.
It says while applying the applicant will have to indicate estimated project cost for which he wishes to get pre-qualified. The estimated project cost shall be indicated in a multiple of Rs 50 crore starting from Rs 200 crore. The process of pre-qualification has started from Tuesday. tnn
NHAI said that the pre-qualified applicants shall be eligible to participate in the qualification stage of all or any of the projects.
The authority proposes to award projects for two/four and six laning of about 10,000 National Highways in the next one year. The step has been taken to streamline and ease the process of pre-qualification of applicants for participating in the bid process of individual projects. As per the new norms, the applications can be submitted as single entity or consortium.
It says while applying the applicant will have to indicate estimated project cost for which he wishes to get pre-qualified. The estimated project cost shall be indicated in a multiple of Rs 50 crore starting from Rs 200 crore. The process of pre-qualification has started from Tuesday. tnn
NHAI said that the pre-qualified applicants shall be eligible to participate in the qualification stage of all or any of the projects.
Honda kick-starts vendor recast
CHENNAI: Japanese auto major Honda may reduce its dependence on Munjal-family owned component companies which currently supply parts to both Hero Honda and Honda Motorcycle & Scooter India (HMSI).
Following its separation with Hero, Honda is restrategizing its vendor policy to build its own supplier network independent of the Hero Group in India. Sources in the auto industry say Honda is doing this both to derisk its business model and for intellectual property issues.
In an email response to a query from TOI, Takashi Nagai, head, south west Asia, Honda Motor Co, said: "We are currently in the process of reviewing various aspects of our two-wheeler business strategy, including supplier network, dealer network and other functions. However since no concrete decisions have been taken yet, we are unable to share any specific information as of now."
Sources say Hero Honda has five vendors as joint ventures or associate companies, from which it gets the bulk of its components. These are Munjal Showa, AG Industries, Sunbeam Auto, Rockman Industries and Satyam Auto Components. In all, it sources components from over 300 suppliers. Many of these Munjal-family owned component companies also supply to HMSI, Honda's 100% subsidiary in India.
When contacted, Hero Honda maintained that for its part it will continue sourcing from Honda subsidiaries as long as it makes business sense. "The amount of business that Hero Honda gives its vendors is phenomenal because motorcycles is a volume game," said Hero Honda CFO Ravi Sud. As an example, he cited the case of carburetor maker Keihin, a 100% Honda subsidiary. "We source 5 million units from them every year," says Sud. When asked if Honda is likely to shift sourcing loyalties, he said, "All transactions with Munjal family-owned component companies are at arms length and they get no preferential treatment".
Honda's decision to build its own capability in sourcing is understandable. After it centralised all parts sourcing in India under Honda Motor India, Honda repeatedly requested Hero Honda to join the umbrella company. But the latter resolutely refused. Following the split, Hero Honda has announced it will build capability to develop and launch its own range. Honda for its part wants to build strength in the area where Hero is the strongest -vendor sourcing and distribution-given that it is planning to launch a 100 cc bike in the Splendor/Passion category soon. The Hero group itself has carved out its businesses between family members as part of a family settlement. While B M Lall and his family now own Hero Honda others like B M Lall's brother Satyanand Munjal's son Yogesh Munjal controls Munjal Showa while Ashok Munjal, son of late Dayanand Munjal, BM Lall's older brother, controls Sunbeam Auto.
When contacted Yogesh Munjal of Munjal Showa told TOI: "It's true there is no assurance from Honda (on continuing the sourcing relationship after the separation) but there's also nothing to the contrary to say that the relationship with HMSI will not continue."
Auto analysts believe that with a full-blown head-to-head competition in Hero Honda's bread and butter 100cc segment right round the corner, Honda may not want to depend too much on Munjal family owned companies. However, any dissociation will take time given that Hero Honda dominates most of the vendors in the two-wheeler business right now. "Honda will take time to build its own supplier network and till then they will need to depend on the current vendors," says a principal with a Delhi-based MNC consultancy firm.
Following its separation with Hero, Honda is restrategizing its vendor policy to build its own supplier network independent of the Hero Group in India. Sources in the auto industry say Honda is doing this both to derisk its business model and for intellectual property issues.
In an email response to a query from TOI, Takashi Nagai, head, south west Asia, Honda Motor Co, said: "We are currently in the process of reviewing various aspects of our two-wheeler business strategy, including supplier network, dealer network and other functions. However since no concrete decisions have been taken yet, we are unable to share any specific information as of now."
Sources say Hero Honda has five vendors as joint ventures or associate companies, from which it gets the bulk of its components. These are Munjal Showa, AG Industries, Sunbeam Auto, Rockman Industries and Satyam Auto Components. In all, it sources components from over 300 suppliers. Many of these Munjal-family owned component companies also supply to HMSI, Honda's 100% subsidiary in India.
When contacted, Hero Honda maintained that for its part it will continue sourcing from Honda subsidiaries as long as it makes business sense. "The amount of business that Hero Honda gives its vendors is phenomenal because motorcycles is a volume game," said Hero Honda CFO Ravi Sud. As an example, he cited the case of carburetor maker Keihin, a 100% Honda subsidiary. "We source 5 million units from them every year," says Sud. When asked if Honda is likely to shift sourcing loyalties, he said, "All transactions with Munjal family-owned component companies are at arms length and they get no preferential treatment".
Honda's decision to build its own capability in sourcing is understandable. After it centralised all parts sourcing in India under Honda Motor India, Honda repeatedly requested Hero Honda to join the umbrella company. But the latter resolutely refused. Following the split, Hero Honda has announced it will build capability to develop and launch its own range. Honda for its part wants to build strength in the area where Hero is the strongest -vendor sourcing and distribution-given that it is planning to launch a 100 cc bike in the Splendor/Passion category soon. The Hero group itself has carved out its businesses between family members as part of a family settlement. While B M Lall and his family now own Hero Honda others like B M Lall's brother Satyanand Munjal's son Yogesh Munjal controls Munjal Showa while Ashok Munjal, son of late Dayanand Munjal, BM Lall's older brother, controls Sunbeam Auto.
When contacted Yogesh Munjal of Munjal Showa told TOI: "It's true there is no assurance from Honda (on continuing the sourcing relationship after the separation) but there's also nothing to the contrary to say that the relationship with HMSI will not continue."
Auto analysts believe that with a full-blown head-to-head competition in Hero Honda's bread and butter 100cc segment right round the corner, Honda may not want to depend too much on Munjal family owned companies. However, any dissociation will take time given that Hero Honda dominates most of the vendors in the two-wheeler business right now. "Honda will take time to build its own supplier network and till then they will need to depend on the current vendors," says a principal with a Delhi-based MNC consultancy firm.
Tuesday, March 8, 2011
200 companies face SEBI rap over low Demat holding record
MUMBAI: Indian Metals & Ferro Alloys has underperformed the BSE Mid-Cap index in the past month. The trading volumes in the stock have plunged to just a 10th of what it was in the first week of January. This is not an isolated case. Nearly 200 stocks face a similar fall in price and volumes due to the reluctance of more than half the investors in these companies to dematerialise their shares.
The Bombay Stock Exchange , or BSE, has shifted over 200 companies to the trade-for-trade, or TFT, segment for their failure to maintain at least 50% of public holding in the demat form. The companies have been shortlisted on the basis of their latest available shareholding patterns, details of which have been filed with the exchange.
The BSE has shifted 207 companies to the TFT group for non-compliance with SEBI's norms on public demat holding, taking the total number of companies in the segment to nearly 1,000, including those penalised for reasons other than non-compliance of demat norms. KGN Industries , Shri Ganesh Spinners , Empower Industries and Avance Technologies have less than 50% public holding in the demat form, a list compiled by the BSE shows.
Even more than a decade after the introduction of dematerialisation, many investors continue to hold shares in the physical form. For completing delivery, one must have stocks in the dematerialised form, but an individual can keep it in the physical form if he or she is not interested in selling it.
Probably, this shifting of companies to the TFT segment could force shareholders to speed up the process of converting shares into the electronic form. Apart from the uniform circuit limit of 5%, companies in the TFT group are subject to other conditions like compulsory delivery of shares and no intra-day squaring of positions.
Dematerialisation of shares is the process of opening a demat account with any of the depository participants registered with SEBI to keep shares in the electronic form. It saves shareholders from the risks of theft of shares, forgery and bad delivery over signature mismatch.
"Typically, the problem of low demat public holding is faced by small companies that have little or no investor interest either due to poor performance or illiquidity," said Edelweiss Securities executive vice-president and head of institutional equities Vikas Khemani. But some investor groups are against the forcible conversion of shares into the dematerialised form.
"If an investor does not want to convert his holdings, he or she cannot be forced to do so as the conversion carries initial and recurring costs," said Virendra Jain, founder of Midas Touch Investors Association. "It is wrong to shift all those companies that have not disclosed their share-holding pattern to the TFT segment. If a company fails to provide the details, the company should be penalised, not the investors," he said.
The Bombay Stock Exchange , or BSE, has shifted over 200 companies to the trade-for-trade, or TFT, segment for their failure to maintain at least 50% of public holding in the demat form. The companies have been shortlisted on the basis of their latest available shareholding patterns, details of which have been filed with the exchange.
The BSE has shifted 207 companies to the TFT group for non-compliance with SEBI's norms on public demat holding, taking the total number of companies in the segment to nearly 1,000, including those penalised for reasons other than non-compliance of demat norms. KGN Industries , Shri Ganesh Spinners , Empower Industries and Avance Technologies have less than 50% public holding in the demat form, a list compiled by the BSE shows.
Even more than a decade after the introduction of dematerialisation, many investors continue to hold shares in the physical form. For completing delivery, one must have stocks in the dematerialised form, but an individual can keep it in the physical form if he or she is not interested in selling it.
Probably, this shifting of companies to the TFT segment could force shareholders to speed up the process of converting shares into the electronic form. Apart from the uniform circuit limit of 5%, companies in the TFT group are subject to other conditions like compulsory delivery of shares and no intra-day squaring of positions.
Dematerialisation of shares is the process of opening a demat account with any of the depository participants registered with SEBI to keep shares in the electronic form. It saves shareholders from the risks of theft of shares, forgery and bad delivery over signature mismatch.
"Typically, the problem of low demat public holding is faced by small companies that have little or no investor interest either due to poor performance or illiquidity," said Edelweiss Securities executive vice-president and head of institutional equities Vikas Khemani. But some investor groups are against the forcible conversion of shares into the dematerialised form.
"If an investor does not want to convert his holdings, he or she cannot be forced to do so as the conversion carries initial and recurring costs," said Virendra Jain, founder of Midas Touch Investors Association. "It is wrong to shift all those companies that have not disclosed their share-holding pattern to the TFT segment. If a company fails to provide the details, the company should be penalised, not the investors," he said.
Markets may find a floor at 5200 level
The Indian market has underperformed most developed market in the past two months. Nifty has corrected by over 15% before rallying from around 5200, which can be a floor for the market for the next couple of months. Any failure to hold 5200 will open the next leg downwards and nifty may drift below 5000. On the higher side, 5800 will act as strong resistance zone as long as we don't see crude oil prices cooling off and some clarity on the political front.
There has been good amount of writing interest in call option beyond 5800-strike price, indicating a cap around 5800 in the short term. Nifty has support around 5350-5400 as there is a huge build-up in put option. Cumulative open interest in put option between 5200-5400-strike prices is around 2.30 crs and cumulative open interest in call is around 1.75 crs between 5500-5700.
We expect nifty to trade in the 5400-5700 range in this series with high intraday volatility. This month, VIX, which has contracted sharply to 22% after making a high of 28% just after the Budget day, may contract further. The PCR is hovering around 1.25, indicating the market will witness buying on declines.
One can initiate ratio call spread in bank nifty wherein one needs to buy 11000 call @ 300 and sell 11300 call @ 170 and 11500 @ 110. In this strategy, one can make maximum profit of 280 if bank nifty expires @ 11500.
This strategy is profitable in the broad range of 11020 to 11780. Below 11020 strategies has a maximum risk of 20 whereas beyond 11780 payoffs will be similar to short futures with unlimited risk. Reliance Industries , Tata Steel , and ICICI Bank can outperform from these levels and can be considered for long exposure as long as Nifty holds above 5400.
There has been good amount of writing interest in call option beyond 5800-strike price, indicating a cap around 5800 in the short term. Nifty has support around 5350-5400 as there is a huge build-up in put option. Cumulative open interest in put option between 5200-5400-strike prices is around 2.30 crs and cumulative open interest in call is around 1.75 crs between 5500-5700.
We expect nifty to trade in the 5400-5700 range in this series with high intraday volatility. This month, VIX, which has contracted sharply to 22% after making a high of 28% just after the Budget day, may contract further. The PCR is hovering around 1.25, indicating the market will witness buying on declines.
One can initiate ratio call spread in bank nifty wherein one needs to buy 11000 call @ 300 and sell 11300 call @ 170 and 11500 @ 110. In this strategy, one can make maximum profit of 280 if bank nifty expires @ 11500.
This strategy is profitable in the broad range of 11020 to 11780. Below 11020 strategies has a maximum risk of 20 whereas beyond 11780 payoffs will be similar to short futures with unlimited risk. Reliance Industries , Tata Steel , and ICICI Bank can outperform from these levels and can be considered for long exposure as long as Nifty holds above 5400.
The 'saat khoon maaf' budget
Srivatsa Krishna
Pranab Mukherjee's Budget left many things undone. For example, he could have allowed FDI in multi-brand retail in cities with more than one million people, but chose not to. Labour reforms, critical to boost India's manufacturing competitiveness, are no longer on the agenda. The current account deficit, at about 3.1% of GDP, is probably the highest since the crisis of 1991, but the FM did nothing done tackle this head-on.
The Budget provisions too little money for subsidies, including the newly announced Food Security Act, which could cost over 1% of GDP. Mukherjee did not hike excise duty to provide for an MGNREGS that is linked to consumer price inflation, nor did he cut corporate tax surcharge when the economy is in the grip of excess demand with high inflation. The Economic Survey talked of many innovations in delivery systems for social services, but the Budget did nothing concrete in this regard. State electricity boards have losses amounting to a whopping 76,000 crore. They were restructured when their losses were around 22,000 crore, but there's no mention of any reforms here.
Yet, taking a leaf out of Ruskin Bond's Seven Murders Forgiven, the finance minister may still be forgiven these sins of omission, if he manages to hold the fiscal deficit around 4.6% of GDP after the inevitable tug-of-war over allocations with all ministries and departments. If he can implement the infrastructure debt fund and direct cash transfer of subsidies for kerosene and LPG to at least half the population by the March 2012 deadline, then much can be forgiven.
The nicest thing about the Budget is that it is the harbinger of eternal hope on every possible front, for every sector of the economy. The Budget announced conditional cash transfers (CCT) to replace kerosene and LPG subsidies. This project has been assigned to Nandan Nilekani and might have a good chance of success. The announcement that several legislations, including the insurance reforms Bill and pensions reforms Bill, will be introduced in this session is welcome, though dependent on how bipartisan consensus evolves.
A hike in the allocation to the infrastructure sector, the possible introduction of the direct taxes code on April 1, 2012 and a promise to introduce GST some time in future, depending on state governments agreeing to the share of the spoils, and most importantly, a promise to keep government borrowing under check in FY12, would go a long way in cleaning up the tax structure without crowding out private investment.
But the Budget presents a bunch of contradictions when one looks at the fine print. Subsidies are supposed to fall from 1.64 lakh crore to 1.43 lakh crore when five states are going to polls. The Food Security Act has been promised and the spending on MGNREGS has been linked to inflation. Oil is almost certain to touch $125 per barrel and yet, the oil subsidy is projected to fall from 38,000 crore to about 23,000 crore. Similarly, global fertiliser prices are at an all-time high, and procurement, stocking and disbursement of foodgrains cost around 1 lakh crore; yet, the other non-Plan expenditure shows a decline.
The power sector is in a complete mess. Power producers have little access to known fuel sources. Environmental extremism in the form of an unimaginative 'go, no-go policy' that counts every shrub that grows accidentally on any wasteland as a 'reserve forest' has stalled 40,000 MW of private sector power projects. Finally state electricity boards are unwilling to implement the open access policy in the face of looming bankruptcy, something that needs emergency reform. Yet the Budget ignored the power sector completely.
Safe passage of a number of reformist Bills is going to depend on bipartisan consensus, absent for now. When the original amendment to the Insurance Act was enacted, the BJP reached out to the Congress and a happy bipartisan consensus ensued reforms. So far, the Congress has not reached out to the BJP for the second round of reforms in insurance, even though both parties promised these reforms in their respective manifestos. The key lesson, which seems to escape our political pundits, is that the UPA did not win the 2004 elections because the NDA's reforms were a failure, nor did it win 2009 because its own populism was a success.
In sum, consider the following scenario: an alarming fiscal deficit, an astronomical current account deficit, unrest in the Middle East and rising oil prices, high inflation, a significant crisis of confidence and FDI numbers falling, and rampant corruption in governance and politics. And you thought I was talking about 2011? No, I was referring to 1991. The parallels are eerily similar, except that we have bountiful forex reserves today to protect us. However, if history is a teacher, then tipping points do occur and it's best if that is recognised and respected in policy formulation.
Pranab Mukherjee's Budget left many things undone. For example, he could have allowed FDI in multi-brand retail in cities with more than one million people, but chose not to. Labour reforms, critical to boost India's manufacturing competitiveness, are no longer on the agenda. The current account deficit, at about 3.1% of GDP, is probably the highest since the crisis of 1991, but the FM did nothing done tackle this head-on.
The Budget provisions too little money for subsidies, including the newly announced Food Security Act, which could cost over 1% of GDP. Mukherjee did not hike excise duty to provide for an MGNREGS that is linked to consumer price inflation, nor did he cut corporate tax surcharge when the economy is in the grip of excess demand with high inflation. The Economic Survey talked of many innovations in delivery systems for social services, but the Budget did nothing concrete in this regard. State electricity boards have losses amounting to a whopping 76,000 crore. They were restructured when their losses were around 22,000 crore, but there's no mention of any reforms here.
Yet, taking a leaf out of Ruskin Bond's Seven Murders Forgiven, the finance minister may still be forgiven these sins of omission, if he manages to hold the fiscal deficit around 4.6% of GDP after the inevitable tug-of-war over allocations with all ministries and departments. If he can implement the infrastructure debt fund and direct cash transfer of subsidies for kerosene and LPG to at least half the population by the March 2012 deadline, then much can be forgiven.
The nicest thing about the Budget is that it is the harbinger of eternal hope on every possible front, for every sector of the economy. The Budget announced conditional cash transfers (CCT) to replace kerosene and LPG subsidies. This project has been assigned to Nandan Nilekani and might have a good chance of success. The announcement that several legislations, including the insurance reforms Bill and pensions reforms Bill, will be introduced in this session is welcome, though dependent on how bipartisan consensus evolves.
A hike in the allocation to the infrastructure sector, the possible introduction of the direct taxes code on April 1, 2012 and a promise to introduce GST some time in future, depending on state governments agreeing to the share of the spoils, and most importantly, a promise to keep government borrowing under check in FY12, would go a long way in cleaning up the tax structure without crowding out private investment.
But the Budget presents a bunch of contradictions when one looks at the fine print. Subsidies are supposed to fall from 1.64 lakh crore to 1.43 lakh crore when five states are going to polls. The Food Security Act has been promised and the spending on MGNREGS has been linked to inflation. Oil is almost certain to touch $125 per barrel and yet, the oil subsidy is projected to fall from 38,000 crore to about 23,000 crore. Similarly, global fertiliser prices are at an all-time high, and procurement, stocking and disbursement of foodgrains cost around 1 lakh crore; yet, the other non-Plan expenditure shows a decline.
The power sector is in a complete mess. Power producers have little access to known fuel sources. Environmental extremism in the form of an unimaginative 'go, no-go policy' that counts every shrub that grows accidentally on any wasteland as a 'reserve forest' has stalled 40,000 MW of private sector power projects. Finally state electricity boards are unwilling to implement the open access policy in the face of looming bankruptcy, something that needs emergency reform. Yet the Budget ignored the power sector completely.
Safe passage of a number of reformist Bills is going to depend on bipartisan consensus, absent for now. When the original amendment to the Insurance Act was enacted, the BJP reached out to the Congress and a happy bipartisan consensus ensued reforms. So far, the Congress has not reached out to the BJP for the second round of reforms in insurance, even though both parties promised these reforms in their respective manifestos. The key lesson, which seems to escape our political pundits, is that the UPA did not win the 2004 elections because the NDA's reforms were a failure, nor did it win 2009 because its own populism was a success.
In sum, consider the following scenario: an alarming fiscal deficit, an astronomical current account deficit, unrest in the Middle East and rising oil prices, high inflation, a significant crisis of confidence and FDI numbers falling, and rampant corruption in governance and politics. And you thought I was talking about 2011? No, I was referring to 1991. The parallels are eerily similar, except that we have bountiful forex reserves today to protect us. However, if history is a teacher, then tipping points do occur and it's best if that is recognised and respected in policy formulation.
Indian shares will underperform emerging market peers: Normura
MUMBAI: Indian shares will underperform emerging market peers in 2011 as higher inflation threatens to stifle economic growth and pricey valuations makes shares less attractive, said Ian Scott, global head of equity strategy, Nomura International.
“A combination of valuations, upward pressure on inflation, the need for monetary policy tightening, together with a hangover period in fund inflows, will act this year,” Londonbased Scott told ET on the sidelines of an investor conference organised by Nomura. Foreign investors have pulled out roughly $2.3 billion from India so far in 2011, dragging down the Sensex by over 10%, after pouring in about $29 billion in 2010.
Worries that stubbornly-high inflation, sparked by a jump in food prices, would force the Reserve Bank of India ( RBI )) to raise interest rates more aggressively and result in a economic and corporate earnings growth slowing triggered the exodus of foreign investors from India.
The Indian stock market is ‘hypersensitive’ to interest rate increases and inflationary pressures compared with its peers, Scott said. “If we look at a ranking of emerging markets and calculate how much each of the equity markets is responding to upward pressure on bond yields, it is seen that the Indian market comes out as the market with the highest sensitivity to movements in bond yields,” he said.
Higher stock valuation compared with other emerging markets has contributed to the flight of foreign money from the Indian market, as investors felt equities did not deserve the premium when the economy is showing signs of slowing down. “The Indian market’s valuation is still a substantial premium to the rest of the emerging markets and also to the Chinese market. That is quite unusual to see such a big gap in multiples ,” Scott said. India’s Sensex trades at 17.37 times estimated earnings while China trades at 14.09 times, according to Bloomberg.
Among other leading emerging markets, Brazil trades at 10.66 times and Russia at 7.41 times. Jim Walker, founder of Hong Kongbased research firm Asianomics, in a recent interview, did not agree with the argument that stock valuations of India are more expensive than that of China. “Valuations of some of China’s high-growth sectors such as manufacturing and consumer goods are much higher than that of India.
But, India has a better track record than China in return on equity ,” said Walker. Nomura’s Scott believes that rising oil price is not necessarily a barrier to good equity performance, as seen in 2007, when the stock market rally did not slow despite crude oil touching $130 a barrel. “Oil price above a $100 a barrel isn’t a constraint in itself, but investors are more concerned over the political environment that is causing oil price increases rather than the oil price increase itself,” he said.
“A combination of valuations, upward pressure on inflation, the need for monetary policy tightening, together with a hangover period in fund inflows, will act this year,” Londonbased Scott told ET on the sidelines of an investor conference organised by Nomura. Foreign investors have pulled out roughly $2.3 billion from India so far in 2011, dragging down the Sensex by over 10%, after pouring in about $29 billion in 2010.
Worries that stubbornly-high inflation, sparked by a jump in food prices, would force the Reserve Bank of India ( RBI )) to raise interest rates more aggressively and result in a economic and corporate earnings growth slowing triggered the exodus of foreign investors from India.
The Indian stock market is ‘hypersensitive’ to interest rate increases and inflationary pressures compared with its peers, Scott said. “If we look at a ranking of emerging markets and calculate how much each of the equity markets is responding to upward pressure on bond yields, it is seen that the Indian market comes out as the market with the highest sensitivity to movements in bond yields,” he said.
Higher stock valuation compared with other emerging markets has contributed to the flight of foreign money from the Indian market, as investors felt equities did not deserve the premium when the economy is showing signs of slowing down. “The Indian market’s valuation is still a substantial premium to the rest of the emerging markets and also to the Chinese market. That is quite unusual to see such a big gap in multiples ,” Scott said. India’s Sensex trades at 17.37 times estimated earnings while China trades at 14.09 times, according to Bloomberg.
Among other leading emerging markets, Brazil trades at 10.66 times and Russia at 7.41 times. Jim Walker, founder of Hong Kongbased research firm Asianomics, in a recent interview, did not agree with the argument that stock valuations of India are more expensive than that of China. “Valuations of some of China’s high-growth sectors such as manufacturing and consumer goods are much higher than that of India.
But, India has a better track record than China in return on equity ,” said Walker. Nomura’s Scott believes that rising oil price is not necessarily a barrier to good equity performance, as seen in 2007, when the stock market rally did not slow despite crude oil touching $130 a barrel. “Oil price above a $100 a barrel isn’t a constraint in itself, but investors are more concerned over the political environment that is causing oil price increases rather than the oil price increase itself,” he said.
Subscribe to:
Posts (Atom)
Posts
