Reserve Bank of India Governor Duvvuri Subbarao on Thursday said India would find it difficult to achieve its fiscal deficit target this year, unless it made adjustments to account for the rise in fuel and fertiliser prices. The comments sparked market concern that the government would need to step up borrowing to fund the gap.
Duvvuri Subbarao In Budget 2011-12, the government had announced a fiscal deficit target of 4.6 per cent of the gross domestic product. This was widely considered to be ambitious, after its 5.1 per cent deficit target for last year was met by high one-time revenues.
“Since crude fertiliser prices have gone up since the Budget announcements, unless some adjustment is made, either on the expenditure side or the tax side, it is difficult to deliver on a 4.6 per cent target,” Subbarao said, after RBI's board meeting here. “It is difficult to say whether the government can deliver on a 4.6 per cent target. It depends on what decision they take and a number of issues --- the adjustment of fuel prices being the most important one,” he said, adding fighting inflation remained the central bank's priority.
The government had said it would borrow a gross Rs 4.17 lakh crore in the current financial year, of which it would raise Rs 2.5 lakh crore in the first half.
Subbarao's comments, which came after the markets closed, raised concerns among bond dealers that the government would increase its borrowing in the second half of the current financial year. “The governor's remarks on fiscal deficit raise doubts that borrowings in the second half of the current financial year could be increased. However, there should not be any impact on markets now, since the concern for the market is immediate supply. We will cross the bridge, as and when it comes,” said Manish Wadhawan, director and head (rates), HSBC India.
Last June, the government had allowed state-run oil firms to fix the price of petrol, but had continued to control the prices of diesel, kerosene and cooking gas to shield the poor and try to tame inflation. State-run oil firms increased petrol prices by about 8.6 per cent from Sunday, a record rise, that is expected to fuel inflation in the country.
RBI had, on May 3, raised interest rates for the ninth time since March 2010, by a sharper-than-expected 50 basis points. It had also said fighting inflation was its priority, even at the expense of some short-term growth. “This is our priority and I only want to reiterate what we said in the annual policy — that we need to bring inflation down to an acceptable level for growth to be sustainable,” Subbarao said.
The wholesale price index has remained stubbornly high for months and rose 8.66 per cent annually in April. The prospect of higher energy prices would exert pressure on RBI to raise interest rates in June and maintain a hawkish stance. RBI expects inflation to stay high in the first half of the current financial year before easing to six per cent by the end of the year.
Saturday, May 21, 2011
Capital gains account scheme to your rescue
It will shield you from paying capital gains tax on profits accrued from the sale of property while earning an interest on it. The interest income, however, will be taxed.
The booming real estate market had meant Kapil Kumar could manage to sell his house in Pune for a neat profit. He had bought the place with the idea that one day he would retire from his job and also from Mumbai. However, 10 years on, the price he was getting was something he hadn’t even dreamt. Wanting to make hay while the sun shines, he completed the deal in record time. The only hitch that remained was the long-term capital gains (LTCG) tax. And in this case, high profits meant higher tax. This set Kumar thinking of ways to save it.
He had heard that investing the profit back in real estate does help save tax. However, he didn’t want to buy any property in the current market. A visit to his chartered accountant (CA) was, thus, warranted.
His CA told him the Income Tax Act exempts capital gains from the sale of a house if the taxpayer invests the same within two years from the date of sale, or constructs another house property within three years from the date of sale. If the entire capital gain is not used, proportionate deduction is also available.
So, Kumar has two years to buy a new house. However, what if by July 31, the last date for filing the tax return, he hasn’t managed to found the right property? How does he convey to the income tax officials that he does, indeed, intend to buy a house within the time allotted to him and, hence, will not be paying tax on the capital gains earned during the year?
SPECIAL DEPOSIT
His CA informed him that in such situations, Kumar can keep the money in a special fixed deposit facility provided by the government. This facility is known as the Capital Gains Account Scheme (CGAS). Let us assume that Kumar earned long-term capital gains of Rs 50 lakh from the sale of his Pune property. The tax at 20 per cent on this amount works out to be Rs 10 lakh (the three per cent education cess has been ignored here for ease of understanding the concept). Section 54 offers exemption from this tax if he purchases within two years or constructs within three years a residential house costing Rs 50 lakh.
Prior to 1988, Kapil would have been required to pay the tax in the financial year during which the capital gains arose, even if he intended to buy or construct a house. After purchasing or constructing a house within the stipulated time frame, he could apply for the refund. When he’d actually receive the refund depended on the strength of his prayers. Among other things, it was inconvenient for the income tax authorities to dig up past records to verify the claim.
Fortunately, the tax department was aware of the problem. CGAS, introduced in 1988, eliminated the need to reopen the assessments for rectification. In effect, CGAS is a special account with banks or specified institutions, to be used when the amount of capital gain is not utilised for the purchase or construction of the new asset before the due date of furnishing return of income (Notification No. 724(E) dated June 22,1988).
If the amount deposited is not utilised fully for purchase or construction of the new asset within the stipulated period, the remaining part would be treated as capital gain of the year in which the period of three years from the date of sale of the original house expires.
FEATURES
There are two types of such accounts: Type-A, a savings deposit, and Type-B, a term deposit. Type-B can be either cumulative or non-cumulative. The interest rates will be the same as those applicable to the normal savings and term bank deposits.
The effective date for claiming exemption will be the date on which the bank receives the application, subject to realisation of cheque or draft. However, the interest will be payable from the date the cash is paid or the cheque or draft is realised.
Amounts are transferable from Type-A to Type-B and vice versa. For premature transfers from Type-B to Type-A, the normal penalties will be applicable.
Withdrawals can be made only from Type-A, by a declaration that the amount sought to be withdrawn is proposed to be utilised for the intended purpose. If the amount to be withdrawn exceeds Rs 25,000, the bank will make the payment by way of a crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment. Any such amount withdrawn must be utilised within 60 days. And the unutilised portion, if any, has to be redeposited into CGAS.
KEEP IN MIND
While the many advantages of CGAS must be acknowledged, one should not ignore the several lacunae which also exist in this facility.
CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. More, the investor is required to pay tax on this interest (to which he has no access) on an accrual basis out of his other income.
Even if the sale is effected in, say, the first month of the financial year (say, April 2011), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilise this money for 15 months (April 2011 to July 2012) as he likes.
We have already discussed the fact that if the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires.
If this amount is to be treated as capital gain of that year, can the assessee purchase another house within two years or construct within three years? May he use CGAS once again? It is illogical to do so and also the fact remains that this capital gain has not arisen out of sale of house, shares, and so on. Therefore the answers to these questions are in the negative.
However, experts believe the taxpayer has a right to set-off the carried forward capital losses against these gains.
The writer is director, Wonderland Consultants
The booming real estate market had meant Kapil Kumar could manage to sell his house in Pune for a neat profit. He had bought the place with the idea that one day he would retire from his job and also from Mumbai. However, 10 years on, the price he was getting was something he hadn’t even dreamt. Wanting to make hay while the sun shines, he completed the deal in record time. The only hitch that remained was the long-term capital gains (LTCG) tax. And in this case, high profits meant higher tax. This set Kumar thinking of ways to save it.
He had heard that investing the profit back in real estate does help save tax. However, he didn’t want to buy any property in the current market. A visit to his chartered accountant (CA) was, thus, warranted.
His CA told him the Income Tax Act exempts capital gains from the sale of a house if the taxpayer invests the same within two years from the date of sale, or constructs another house property within three years from the date of sale. If the entire capital gain is not used, proportionate deduction is also available.
So, Kumar has two years to buy a new house. However, what if by July 31, the last date for filing the tax return, he hasn’t managed to found the right property? How does he convey to the income tax officials that he does, indeed, intend to buy a house within the time allotted to him and, hence, will not be paying tax on the capital gains earned during the year?
SPECIAL DEPOSIT
His CA informed him that in such situations, Kumar can keep the money in a special fixed deposit facility provided by the government. This facility is known as the Capital Gains Account Scheme (CGAS). Let us assume that Kumar earned long-term capital gains of Rs 50 lakh from the sale of his Pune property. The tax at 20 per cent on this amount works out to be Rs 10 lakh (the three per cent education cess has been ignored here for ease of understanding the concept). Section 54 offers exemption from this tax if he purchases within two years or constructs within three years a residential house costing Rs 50 lakh.
Prior to 1988, Kapil would have been required to pay the tax in the financial year during which the capital gains arose, even if he intended to buy or construct a house. After purchasing or constructing a house within the stipulated time frame, he could apply for the refund. When he’d actually receive the refund depended on the strength of his prayers. Among other things, it was inconvenient for the income tax authorities to dig up past records to verify the claim.
Fortunately, the tax department was aware of the problem. CGAS, introduced in 1988, eliminated the need to reopen the assessments for rectification. In effect, CGAS is a special account with banks or specified institutions, to be used when the amount of capital gain is not utilised for the purchase or construction of the new asset before the due date of furnishing return of income (Notification No. 724(E) dated June 22,1988).
If the amount deposited is not utilised fully for purchase or construction of the new asset within the stipulated period, the remaining part would be treated as capital gain of the year in which the period of three years from the date of sale of the original house expires.
FEATURES
There are two types of such accounts: Type-A, a savings deposit, and Type-B, a term deposit. Type-B can be either cumulative or non-cumulative. The interest rates will be the same as those applicable to the normal savings and term bank deposits.
The effective date for claiming exemption will be the date on which the bank receives the application, subject to realisation of cheque or draft. However, the interest will be payable from the date the cash is paid or the cheque or draft is realised.
Amounts are transferable from Type-A to Type-B and vice versa. For premature transfers from Type-B to Type-A, the normal penalties will be applicable.
Withdrawals can be made only from Type-A, by a declaration that the amount sought to be withdrawn is proposed to be utilised for the intended purpose. If the amount to be withdrawn exceeds Rs 25,000, the bank will make the payment by way of a crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment. Any such amount withdrawn must be utilised within 60 days. And the unutilised portion, if any, has to be redeposited into CGAS.
KEEP IN MIND
While the many advantages of CGAS must be acknowledged, one should not ignore the several lacunae which also exist in this facility.
CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. More, the investor is required to pay tax on this interest (to which he has no access) on an accrual basis out of his other income.
Even if the sale is effected in, say, the first month of the financial year (say, April 2011), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilise this money for 15 months (April 2011 to July 2012) as he likes.
We have already discussed the fact that if the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires.
If this amount is to be treated as capital gain of that year, can the assessee purchase another house within two years or construct within three years? May he use CGAS once again? It is illogical to do so and also the fact remains that this capital gain has not arisen out of sale of house, shares, and so on. Therefore the answers to these questions are in the negative.
However, experts believe the taxpayer has a right to set-off the carried forward capital losses against these gains.
The writer is director, Wonderland Consultants
Volatile markets: Factors investors need to track
The markets are going through a volatile phase since the last few months due to several factors at the domestic as well as global levels. The developments at the global macroeconomic level drive sentiments of large global investors. Therefore, it is important for investors to track the significant developments around the world, and analyse their potential impact on the domestic stock market sentiments.
You can classify global developments into two categories. On the one side, there are those that do not directly impact the economy. On the other, there are triggers that have a direct impact on the prices of goods that are commonly-used, and hence have a direct impact on the economy.
Global economic developments
There are several factors that influence sentiments of global investors. There are many global developments (ranging from the US unemployment data to crisis in West Asia and Europe, and monetary tightening in China) that influence the short-term market sentiments. Therefore, short term investors should track them closely. In general, medium to long-term investors need not be too critical about short-term movements. They should follow macroeconomic trends that may influence sectors or stocks in general, and use them to make entry or exit decisions.
Volatility in global commodities
The prices of global commodities have been quite volatile in the recent times due to various factors at the global level as well as speculative plays. Investments in commodities have been used as hedging instruments by large global investors against sovereign and currency risks. It is important to track the movements in global commodities as they have the potential to drive the global inflation rate, and destablise economic growth paths.
In general, the domestic economy is favourably-placed with respect to the global point of view barring some concerns related to inflation. The stock markets here are expected to continue their out-performance. Therefore, long-term investors should analyse the economic and business conditions carefully and make the necessary adjustments in their portfolios.
Investments in stock markets
In general, the markets are expected to remain firm and rally further from the current levels, barring the regular correction phases. However, investors should track the rising interest rates and their positions in interest rate-sensitive sectors. Sectors that are expected to remain favorable include technology, FMCG, infrastructure, and energy.
Investments in commodities
There has been a sharp correction in the commodity markets in the recent past due to turbulence in the global markets and unwinding of speculative positions. The recent correction has brought valuations closer to fundamental values and hence investments in commodities look attractive. Investors can look at investing in commodities from a portfolio diversification perspective.
Investments in debt instruments
The yields from debt instruments have gone up due to the high interest rates being offered. Both global and domestic factors are expected to keep fuelling the inflation rate in the short to medium terms. Hence, the interest rates are expected to rule high. Risk-averse investors can look at reducing their exposure to equity and other risky assets, and diversify with debt-based instruments.
You can classify global developments into two categories. On the one side, there are those that do not directly impact the economy. On the other, there are triggers that have a direct impact on the prices of goods that are commonly-used, and hence have a direct impact on the economy.
Global economic developments
There are several factors that influence sentiments of global investors. There are many global developments (ranging from the US unemployment data to crisis in West Asia and Europe, and monetary tightening in China) that influence the short-term market sentiments. Therefore, short term investors should track them closely. In general, medium to long-term investors need not be too critical about short-term movements. They should follow macroeconomic trends that may influence sectors or stocks in general, and use them to make entry or exit decisions.
Volatility in global commodities
The prices of global commodities have been quite volatile in the recent times due to various factors at the global level as well as speculative plays. Investments in commodities have been used as hedging instruments by large global investors against sovereign and currency risks. It is important to track the movements in global commodities as they have the potential to drive the global inflation rate, and destablise economic growth paths.
In general, the domestic economy is favourably-placed with respect to the global point of view barring some concerns related to inflation. The stock markets here are expected to continue their out-performance. Therefore, long-term investors should analyse the economic and business conditions carefully and make the necessary adjustments in their portfolios.
Investments in stock markets
In general, the markets are expected to remain firm and rally further from the current levels, barring the regular correction phases. However, investors should track the rising interest rates and their positions in interest rate-sensitive sectors. Sectors that are expected to remain favorable include technology, FMCG, infrastructure, and energy.
Investments in commodities
There has been a sharp correction in the commodity markets in the recent past due to turbulence in the global markets and unwinding of speculative positions. The recent correction has brought valuations closer to fundamental values and hence investments in commodities look attractive. Investors can look at investing in commodities from a portfolio diversification perspective.
Investments in debt instruments
The yields from debt instruments have gone up due to the high interest rates being offered. Both global and domestic factors are expected to keep fuelling the inflation rate in the short to medium terms. Hence, the interest rates are expected to rule high. Risk-averse investors can look at reducing their exposure to equity and other risky assets, and diversify with debt-based instruments.
Debt instruments look attractive as interest rates go up
The inflation rate has been ruling quite high in emerging nations ever since the global economy came out of the recession last year. On the other hand, inflation remained quite subdued in the developed nations last year. However, it has started rising in the developed nations as well recently, which is a cause for concern across the world.
The reason for the current situation and root cause of inflation is quite complex due to the involvement of several factors - global as well as domestic. That is why it is getting more difficult to get a handle on the situation. In India, the initial wave in inflation was fuelled by rising prices of food articles. Later, it was driven by rising prices of fuel, manufactured goods and non-food articles. Analysts believe that globally inflation is likely to remain firm in the short to medium terms, and it requires a synchronised effort across various policies to control the situation.
These are some of the main factors that are expected to influence the inflation rate in the short to medium terms here:
Commodity price
As the global economies are recovering, the prices of global commodities such as fuel and metals are expected to rise due to more demand. Higher price in international commodities is a major factor that can influence the inflation rate here.
The cascading effect of high prices in international commodities and food articles , and high interest rates, on the manufacturing sector , is another important factor, going forward.
Supply chain
The supply chain inefficiencies , and speculation in agricultural commodities and food articles has already created panic, and triggered sharp price rises many times in the past. This is another major factor that can influence the inflation rate here, going forward .
RBI measures
In India, the government and the Reserve Bank of India (RBI) are taking a tough stand against inflation . The RBI has already raised the key interest rates seven times over the last 18 months. The policymakers are ready to compromise on economic growth to some extent to deal with the rising inflation rate because the implications of a high inflation rate are quite widespread, especially for the economically weaker sections.
Uncontrolled inflation is actually destructive for a country as consumers and investors change their spending habits.
The reason for the current situation and root cause of inflation is quite complex due to the involvement of several factors - global as well as domestic. That is why it is getting more difficult to get a handle on the situation. In India, the initial wave in inflation was fuelled by rising prices of food articles. Later, it was driven by rising prices of fuel, manufactured goods and non-food articles. Analysts believe that globally inflation is likely to remain firm in the short to medium terms, and it requires a synchronised effort across various policies to control the situation.
These are some of the main factors that are expected to influence the inflation rate in the short to medium terms here:
Commodity price
As the global economies are recovering, the prices of global commodities such as fuel and metals are expected to rise due to more demand. Higher price in international commodities is a major factor that can influence the inflation rate here.
The cascading effect of high prices in international commodities and food articles , and high interest rates, on the manufacturing sector , is another important factor, going forward.
Supply chain
The supply chain inefficiencies , and speculation in agricultural commodities and food articles has already created panic, and triggered sharp price rises many times in the past. This is another major factor that can influence the inflation rate here, going forward .
RBI measures
In India, the government and the Reserve Bank of India (RBI) are taking a tough stand against inflation . The RBI has already raised the key interest rates seven times over the last 18 months. The policymakers are ready to compromise on economic growth to some extent to deal with the rising inflation rate because the implications of a high inflation rate are quite widespread, especially for the economically weaker sections.
Uncontrolled inflation is actually destructive for a country as consumers and investors change their spending habits.
Volatility can indicate a rebound for stock markets
The impact of global economic interplay was clearly visible in the stock markets last week. The sharp decline in commodity prices arrested the decline in the domestic stock markets and brought about some stability, albeit with a high degree of volatility.
The debate over the extension of the second round of quantitative easing (QE2) in the US contributed to the correction in commodity prices. Renewed anxiety over Europe's debt crisis, concerns over runway inflation in Asia and political turbulence in West Asia has left the global markets nervous.
Investor nervousness, as usual, brings on nothing but volatility. The current market volatility has shown how inter-related the global economies are, and how investor sentiment can change quickly as the direction of the markets change. It can be seen from the fact that just a rate hike ago, the domestic stock markets as represented by the Nifty was near the 6,000 level due to copious inflow from foreign institutional investors (FIIs). Now, less than a month and a steep rate hike later, the markets are down by five percent month on month.
Volatility precedes change in direction
Many investors think a high degree of volatility indicates a problem. But, many market experts think otherwise. Analysts believe that increased volatility can indicate a rebound for the markets . Usually, volatile market movements precede a change in the market direction.
A high VIX appears just before a market rally, and a low VIX usually augurs a slide. Hence, investors should find strategies to deal with market volatility rather than be frightened of it.
The debate over the extension of the second round of quantitative easing (QE2) in the US contributed to the correction in commodity prices. Renewed anxiety over Europe's debt crisis, concerns over runway inflation in Asia and political turbulence in West Asia has left the global markets nervous.
Investor nervousness, as usual, brings on nothing but volatility. The current market volatility has shown how inter-related the global economies are, and how investor sentiment can change quickly as the direction of the markets change. It can be seen from the fact that just a rate hike ago, the domestic stock markets as represented by the Nifty was near the 6,000 level due to copious inflow from foreign institutional investors (FIIs). Now, less than a month and a steep rate hike later, the markets are down by five percent month on month.
Volatility precedes change in direction
Many investors think a high degree of volatility indicates a problem. But, many market experts think otherwise. Analysts believe that increased volatility can indicate a rebound for the markets . Usually, volatile market movements precede a change in the market direction.
A high VIX appears just before a market rally, and a low VIX usually augurs a slide. Hence, investors should find strategies to deal with market volatility rather than be frightened of it.
Infosys to start new campus in Shanghai, to invest $125-150 million
SHANGHAI: Infosys Technologies chairman N R Narayana Murthy on Saturday laid the foundation of a new campus in Shanghai, and announced plans to treble the company's business operations in China.
Addressing a press conference after the foundation laying ceremony, Murthy suggested China needs companies like Infosys as much as they need the Chinese market.
"China has demonstrated an extraordinary pace of growth. Such growth cannot be sustained unless it is backed up by scalable, easily maintainable, easily available and easily usable information systems. That is where we believe that there is opportunity for us in China for us," he said.
Murthy was joined at the foundation laying ceremony and the press conference by Mohandas Pai, the Infosys board member who will be quitting the company.
"I am with the company till June 10. I will continue to work on the Shanghai project even after that. I will work on this project and a project in India for about a year," Pai told TOI on the sidelines of the ceremony. He did not wish to disclose future career plans at this stage.
The operations in China account for one to 1.5 per cent of the company's total business volume. Infosys plans to raise it to five per cent over the next three years, Murthy said. The new campus being built on 15 acres of land at a cost of $150 million will be the largest software development centre of Infosys outside India, he said.
The company, which has a staff of 3,200 in Shanghai at present, will employ at total of 10,000 professionals by the time the new campus becomes operational, Rangarajan Vellamore, chief executive officer of Infosys Technologies (China) Co., said during the ceremony, which was attended by Indian ambassador S.Jaishankar and Feng Guoqing, Communist Party leader at Shanghai Municipal Corporation.
The rising labor costs in Shanghai did not cause much worry to Infosys, which believed in paying high wages to attract the best talent, who can deliver high quality services to clients, Pai said at the press conference.
"We will use our enhanced capacity here to deliver high quality consulting and software services to the global markets as well as to our clients in China," Murthy said.
The campus will have facilities for software development, labs, data centers, training facilities, food courts, a 1,500-seater auditorium, gym, and other recreational facilities, he said.
Addressing a press conference after the foundation laying ceremony, Murthy suggested China needs companies like Infosys as much as they need the Chinese market.
"China has demonstrated an extraordinary pace of growth. Such growth cannot be sustained unless it is backed up by scalable, easily maintainable, easily available and easily usable information systems. That is where we believe that there is opportunity for us in China for us," he said.
Murthy was joined at the foundation laying ceremony and the press conference by Mohandas Pai, the Infosys board member who will be quitting the company.
"I am with the company till June 10. I will continue to work on the Shanghai project even after that. I will work on this project and a project in India for about a year," Pai told TOI on the sidelines of the ceremony. He did not wish to disclose future career plans at this stage.
The operations in China account for one to 1.5 per cent of the company's total business volume. Infosys plans to raise it to five per cent over the next three years, Murthy said. The new campus being built on 15 acres of land at a cost of $150 million will be the largest software development centre of Infosys outside India, he said.
The company, which has a staff of 3,200 in Shanghai at present, will employ at total of 10,000 professionals by the time the new campus becomes operational, Rangarajan Vellamore, chief executive officer of Infosys Technologies (China) Co., said during the ceremony, which was attended by Indian ambassador S.Jaishankar and Feng Guoqing, Communist Party leader at Shanghai Municipal Corporation.
The rising labor costs in Shanghai did not cause much worry to Infosys, which believed in paying high wages to attract the best talent, who can deliver high quality services to clients, Pai said at the press conference.
"We will use our enhanced capacity here to deliver high quality consulting and software services to the global markets as well as to our clients in China," Murthy said.
The campus will have facilities for software development, labs, data centers, training facilities, food courts, a 1,500-seater auditorium, gym, and other recreational facilities, he said.
Friday, May 20, 2011
Indian communication satellite GSAT-8 successfully launched
India's latest communication satellite GSAT-8 was today successfully launched by Arianespace from Kourou in French Guiana to give a boost to direct-to-home services in the country.
GSAT-8 was injected into space by European launcher Arianespace's Ariane 5 rocket which lifted-off at 02.08 am (IST), with Japan's ST-2 spacecraft as co-passenger.
French Guiana is a region of France on the North-East coast of South America.
Weighing 3,100 kg at lift-off, GSAT-8 is one of the heaviest and high-powered satellites built by the Bangalore-headquartered Indian Space Research Organisation (ISRO).
An ISRO team, which witnessed the launch, expressed delight over the successful mission.
"I am extremely happy to announce that ISRO's Master Control Facility at Hassan near Bangalore has confirmed the reception of signals from GSAT-8 and taken charge of the command and control of GSAT-8 immediately after its injection into the geo-stationary transfer orbit," ISRO chairman K Radhakrishnan said.
"This (the launch) is another great moment for u," he said.
Radhakrishnan said the user community in India was looking forward for the operationalisation of the 24 high-power Ku band transponders into the Indian National Satellite system.
ISRO officials said the launch was doubly gratifying as the space agency had lost two satellites last year in two unsuccessful GSLV missions launched from the home soil. ISRO was desperately looking to augment transponder capacity, which is in great demand.
Built by Japan’s Mitsubishi Electric Company, ST-2 would be operated by the ST-2 Satellite Ventures joint company of Singapore Telecommunications Ltd (SingTel) and Taiwan’s Chunghwa Telecom Company Ltd.
GSAT-8 carried 24 transponders to augment India’s Ku-band relay capabilities primarily for direct-to-home TV broadcast services with a coverage zone including the entire Indian subcontinent.
Additionally, GSAT-8 carried the two-channel GAGAN system for aircraft navigation assistance over Indian airspace and adjoining areas.
GSAT-8 was injected into space by European launcher Arianespace's Ariane 5 rocket which lifted-off at 02.08 am (IST), with Japan's ST-2 spacecraft as co-passenger.
French Guiana is a region of France on the North-East coast of South America.
Weighing 3,100 kg at lift-off, GSAT-8 is one of the heaviest and high-powered satellites built by the Bangalore-headquartered Indian Space Research Organisation (ISRO).
An ISRO team, which witnessed the launch, expressed delight over the successful mission.
"I am extremely happy to announce that ISRO's Master Control Facility at Hassan near Bangalore has confirmed the reception of signals from GSAT-8 and taken charge of the command and control of GSAT-8 immediately after its injection into the geo-stationary transfer orbit," ISRO chairman K Radhakrishnan said.
"This (the launch) is another great moment for u," he said.
Radhakrishnan said the user community in India was looking forward for the operationalisation of the 24 high-power Ku band transponders into the Indian National Satellite system.
ISRO officials said the launch was doubly gratifying as the space agency had lost two satellites last year in two unsuccessful GSLV missions launched from the home soil. ISRO was desperately looking to augment transponder capacity, which is in great demand.
Built by Japan’s Mitsubishi Electric Company, ST-2 would be operated by the ST-2 Satellite Ventures joint company of Singapore Telecommunications Ltd (SingTel) and Taiwan’s Chunghwa Telecom Company Ltd.
GSAT-8 carried 24 transponders to augment India’s Ku-band relay capabilities primarily for direct-to-home TV broadcast services with a coverage zone including the entire Indian subcontinent.
Additionally, GSAT-8 carried the two-channel GAGAN system for aircraft navigation assistance over Indian airspace and adjoining areas.
NSE changes algorithm approval process
The National Stock Exchange (NSE) has revised the approval mechanism for tools and mathematical models used by brokers for efficient and speedy clearance through algorithmic trading.
“Trading members have made a representation to the exchange to make the process smooth and to facilitate early approval of decision support tools/algorithm for trading through non-Neat front-end,” NSE informed its members in a circular this week. “Accordingly, to facilitate efficient and speedy approval of the decision support tools/algorithms, the approval process has been revised,” the exchange said.
According to the circular issued by NSE, the decision support tools/algorithm applications submitted by the members would be categorised in three ways —approved algorithm through computer-to-computer link (CTCL), non-approved algorithm through CTCL and direct market access algorithm.
Vendors who want to identify their decision support tools/algorithmic trading product offerings to trading members as “approved algorithm” will have to apply to the exchange in a prescribed format. The exchange will identify the vendor’s product as “approved algorithm” on fulfilment of the conditions specified by the Securities and Exchange Board of India (Sebi) and NSE.
For non-approved algorithm through CTCL, members would be required to give demonstration of the automated risk-management features for each decision support tool/algorithmic trading product, NSE said.
For members using non-Neat front-end, NSE has proposed to provide a separate category without Neat login facility along with the current categories of users. “Members are requested to note that such a category of users shall not be allowed to login/trade through Neat/Neat-Plus. Members will be required to build additional back-up facilities for exigency. This category of users will not be required to provide any certification as they do not have trading eligibility,” the exchange said.
The procedure to request for such user IDs would be provided separately, NSE said.
“Trading members have made a representation to the exchange to make the process smooth and to facilitate early approval of decision support tools/algorithm for trading through non-Neat front-end,” NSE informed its members in a circular this week. “Accordingly, to facilitate efficient and speedy approval of the decision support tools/algorithms, the approval process has been revised,” the exchange said.
According to the circular issued by NSE, the decision support tools/algorithm applications submitted by the members would be categorised in three ways —approved algorithm through computer-to-computer link (CTCL), non-approved algorithm through CTCL and direct market access algorithm.
Vendors who want to identify their decision support tools/algorithmic trading product offerings to trading members as “approved algorithm” will have to apply to the exchange in a prescribed format. The exchange will identify the vendor’s product as “approved algorithm” on fulfilment of the conditions specified by the Securities and Exchange Board of India (Sebi) and NSE.
For non-approved algorithm through CTCL, members would be required to give demonstration of the automated risk-management features for each decision support tool/algorithmic trading product, NSE said.
For members using non-Neat front-end, NSE has proposed to provide a separate category without Neat login facility along with the current categories of users. “Members are requested to note that such a category of users shall not be allowed to login/trade through Neat/Neat-Plus. Members will be required to build additional back-up facilities for exigency. This category of users will not be required to provide any certification as they do not have trading eligibility,” the exchange said.
The procedure to request for such user IDs would be provided separately, NSE said.
Top Tata executives do not attend swearing-in despite invite. Mamata BanerjeeTrinamool Congress chief Mamata Banerjee on Friday opened another front
Top Tata executives do not attend swearing-in despite invite.
Mamata BanerjeeTrinamool Congress chief Mamata Banerjee on Friday opened another front against the Tata group, hours after being sworn in as the chief minister of West Bengal.
“My first decision as chief minister is to return the 400 acres to the unwilling farmers of Singur,” Banerjee said after the first cabinet meeting on Friday.
This 400 acres is part of the 1,000 acres acquired for the Tatas’ Nano factory. Trinamool says it was acquired forcibly.
“It has been decided at the cabinet’s first meeting that the Tatas are welcome to build their factory on 600 acres. But 400 acres will be given back to the farmers,” she said.
The Nano project became a big political issue in 2008 when Banerjee sided with the farmers and asked the state government to return the land acquired forcibly.
The Tatas were forced to shift the project to Sanand in Gujarat.
While Banerjee could not give a deadline by when the land would be returned, she said the action would be in accordance with law.
A Tata Motors spokesperson said, “We have no guidance.”
The decision dashes hopes that the new government may become friendly with the Tatas to send a signal that it welcomes investments into the state – the numerous Trinamool Congress agitations against industry notwithstanding.
The Tata group had kept a communication channel with the Trinamool Congress open by informing it about the launch of its cancer hospital on May 16. The hospital was inaugurated by Group Chairman Ratan Tata.
The senior Tata executives invited for Banerjee’s swearing-in ceremony did not turn up. The Trinamool Congress had sent invites to Ratan Tata, Tata Sons Director R Gopalakrishnan, Tata Steel Vice-Chairman B Muthuraman and Tata Motors Vice-Chairman Ravi Kant.
Asked if the move would make future investments by the Tata group uncertain, Banerjee said, “Bengal will be such a place that I will not have to invite the Tatas. They will come and invest.”
Banerjee said she would make the state government’s lease agreement with Tata Motors public. The Left Front government had put it partially in the public domain.
Experts say the main impediment in returning the land is law. Under the Land Acquisition Act, 1894, land once acquired for a public purpose cannot be returned. However, a new legislation can be passed.
The previous Left Front government, under which the land was acquired, claimed that only 181 acres was disputed.
Mamata BanerjeeTrinamool Congress chief Mamata Banerjee on Friday opened another front against the Tata group, hours after being sworn in as the chief minister of West Bengal.
“My first decision as chief minister is to return the 400 acres to the unwilling farmers of Singur,” Banerjee said after the first cabinet meeting on Friday.
This 400 acres is part of the 1,000 acres acquired for the Tatas’ Nano factory. Trinamool says it was acquired forcibly.
“It has been decided at the cabinet’s first meeting that the Tatas are welcome to build their factory on 600 acres. But 400 acres will be given back to the farmers,” she said.
The Nano project became a big political issue in 2008 when Banerjee sided with the farmers and asked the state government to return the land acquired forcibly.
The Tatas were forced to shift the project to Sanand in Gujarat.
While Banerjee could not give a deadline by when the land would be returned, she said the action would be in accordance with law.
A Tata Motors spokesperson said, “We have no guidance.”
The decision dashes hopes that the new government may become friendly with the Tatas to send a signal that it welcomes investments into the state – the numerous Trinamool Congress agitations against industry notwithstanding.
The Tata group had kept a communication channel with the Trinamool Congress open by informing it about the launch of its cancer hospital on May 16. The hospital was inaugurated by Group Chairman Ratan Tata.
The senior Tata executives invited for Banerjee’s swearing-in ceremony did not turn up. The Trinamool Congress had sent invites to Ratan Tata, Tata Sons Director R Gopalakrishnan, Tata Steel Vice-Chairman B Muthuraman and Tata Motors Vice-Chairman Ravi Kant.
Asked if the move would make future investments by the Tata group uncertain, Banerjee said, “Bengal will be such a place that I will not have to invite the Tatas. They will come and invest.”
Banerjee said she would make the state government’s lease agreement with Tata Motors public. The Left Front government had put it partially in the public domain.
Experts say the main impediment in returning the land is law. Under the Land Acquisition Act, 1894, land once acquired for a public purpose cannot be returned. However, a new legislation can be passed.
The previous Left Front government, under which the land was acquired, claimed that only 181 acres was disputed.
Retail investors may get unused staff quota in IPOs
NEW DELHI: Market regulator Securities and Exchange Board of India (SEBI) is considering allowing companies to allocate the unused quota in public offers exclusively to retail investors.
The move is expected to further increase retail participation in government offers where the employee quota is usually undersubscribed while retail is oversold because of good pricing. "A proposal is under examination," a SEBI official told ET.
At present, the unused employee quota in public offers is added to the net offer, which means it is distributed on a proportional basis to all categories of investors including retail, high net worth and institutional investors. Experts say the move will enhance retail interest and also suggest capping of employee quota.
"It makes sense to offer unsubscribed employee quote to retail as it will increase their chances to get allotment... if retail does utilise it, the quota can be given to other categories," said Prithvi Haldea of Prime Database. Employers can allocate a maximum of 10% of the total offer to their employees as per the existing policy.
In most of the recent public offers, especially those by the state-run companies, the portion has been under-subscribed. Power Finance Corporation (PFC) had reserved 0.12% for employees in its recently concluded follow-on offer. The overall offer was subscribed 4.4 times.
The retail segment was subscribed two times while the employee quota only got 91% subscription. The Coal India IPO, the largest ever in India, had a 10% reservation for employees of the public sector enterprise. After lukewarm response from employees, the unused quota was allocated to other categories on a proportional basis. Similar was the case with other offers including that of NTPC and Manganese Ore.
The move may also have been prompted by concerns that employee quota can be manipulated by the management. "There should be a cap of how many shares an employee can subscribe to, to ensure that no employee acts on behalf of the management," said Haldea. The overall cap on employee quota should be equal to the number of employees in a company and cap per individual employee.
A panel advising the market regulator SEBI had recommended that the quota be done away with. The move comes close on the heels of another pro- retail investors measure that allowed retail investors to place their bids at the discounted prices in public offers. As much as 50% of the shares on offer is reserved for qualified institutional buyers while 35% for retail investors.
The move is expected to further increase retail participation in government offers where the employee quota is usually undersubscribed while retail is oversold because of good pricing. "A proposal is under examination," a SEBI official told ET.
At present, the unused employee quota in public offers is added to the net offer, which means it is distributed on a proportional basis to all categories of investors including retail, high net worth and institutional investors. Experts say the move will enhance retail interest and also suggest capping of employee quota.
"It makes sense to offer unsubscribed employee quote to retail as it will increase their chances to get allotment... if retail does utilise it, the quota can be given to other categories," said Prithvi Haldea of Prime Database. Employers can allocate a maximum of 10% of the total offer to their employees as per the existing policy.
In most of the recent public offers, especially those by the state-run companies, the portion has been under-subscribed. Power Finance Corporation (PFC) had reserved 0.12% for employees in its recently concluded follow-on offer. The overall offer was subscribed 4.4 times.
The retail segment was subscribed two times while the employee quota only got 91% subscription. The Coal India IPO, the largest ever in India, had a 10% reservation for employees of the public sector enterprise. After lukewarm response from employees, the unused quota was allocated to other categories on a proportional basis. Similar was the case with other offers including that of NTPC and Manganese Ore.
The move may also have been prompted by concerns that employee quota can be manipulated by the management. "There should be a cap of how many shares an employee can subscribe to, to ensure that no employee acts on behalf of the management," said Haldea. The overall cap on employee quota should be equal to the number of employees in a company and cap per individual employee.
A panel advising the market regulator SEBI had recommended that the quota be done away with. The move comes close on the heels of another pro- retail investors measure that allowed retail investors to place their bids at the discounted prices in public offers. As much as 50% of the shares on offer is reserved for qualified institutional buyers while 35% for retail investors.
Consider distressed assets for bargain
BANGALORE: If you are planning to buy a house, you could consider buying one going under the hammer. Properties auctioned through the Debt Recovery Tribunal (DRT) provide buyers with an opportunity to buy properties at a bargain price.
Banks and financial institutions auction off distressed assets to recover debts. Properties auctioned through DRTs are advertised in newspapers . If researched and bid upon, these properties could be a good bet for prospective buyers as they are priced much below the market value . "Resale properties have clear titles. Properties are priced 10% to 20% cheaper than current market values. Since these properties are quite old, the valuation is lower . The construction value of the property depreciates depending on how old the property is," said Naresh Dandapat , regional director-South at real estate consultancy Knight Frank India.
Banks are empowered to initiate action against defaulters under the Securitisation Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) to recover the dues without the intervention of the court. The lender/ bank, calls for a public auction where a buyer pays 10% of the reserve price as earnest money deposit (EMD) to participate in the auction. A consortium of lenders approach the DRT to recover their share of dues. DRT is an appellate established under the Recovery of Debts Due to Banks and Financial Institutions Act 1983 and SARFAESI is an Act under the DRT which came into force from June 2002.
Previously, people were wary of buying properties auctioned through DRT, as there were higher levels of negative sentiments towards foreclosure homes. "There is an element of risk when the owner of the asset makes a claim under section 17 of SARFAESI Act," said AV Bagur , director, Bank DRT Informatic Service. But the sentiment is slowly changing as property buyers carry out a thorough due diligence process . "It's zero risk as long as the lender takes adequate measures in putting up the property for auction in the prescribed manner. The buyer of such property can go through the legal documents and papers pertaining to the property in question before deciding to participate in the auction," said Ashok Rao, DGM, Manipal Housing Finance Syndicate.
It's not just the end users eyeing DRT properties. Many realtors and developers find value distressed assets. These could be large parcels of defunct industrial land/ distressed assets where the borrower could have defaulted . A 25-acre BPL property valued at over Rs 100 crore is up for grabs in ITBP, Whitefield , according to sources in the know. Kesarwala Industries' nine acre property in Whitefield valued at over Rs 108 crore is going under the hammer shortly, said an industry source.
There were 3,710 appeals filed at the DRT cell in Bangalore last year compared to 2,092 in 2009, according to sources in the tribunal.
Banks and financial institutions auction off distressed assets to recover debts. Properties auctioned through DRTs are advertised in newspapers . If researched and bid upon, these properties could be a good bet for prospective buyers as they are priced much below the market value . "Resale properties have clear titles. Properties are priced 10% to 20% cheaper than current market values. Since these properties are quite old, the valuation is lower . The construction value of the property depreciates depending on how old the property is," said Naresh Dandapat , regional director-South at real estate consultancy Knight Frank India.
Banks are empowered to initiate action against defaulters under the Securitisation Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) to recover the dues without the intervention of the court. The lender/ bank, calls for a public auction where a buyer pays 10% of the reserve price as earnest money deposit (EMD) to participate in the auction. A consortium of lenders approach the DRT to recover their share of dues. DRT is an appellate established under the Recovery of Debts Due to Banks and Financial Institutions Act 1983 and SARFAESI is an Act under the DRT which came into force from June 2002.
Previously, people were wary of buying properties auctioned through DRT, as there were higher levels of negative sentiments towards foreclosure homes. "There is an element of risk when the owner of the asset makes a claim under section 17 of SARFAESI Act," said AV Bagur , director, Bank DRT Informatic Service. But the sentiment is slowly changing as property buyers carry out a thorough due diligence process . "It's zero risk as long as the lender takes adequate measures in putting up the property for auction in the prescribed manner. The buyer of such property can go through the legal documents and papers pertaining to the property in question before deciding to participate in the auction," said Ashok Rao, DGM, Manipal Housing Finance Syndicate.
It's not just the end users eyeing DRT properties. Many realtors and developers find value distressed assets. These could be large parcels of defunct industrial land/ distressed assets where the borrower could have defaulted . A 25-acre BPL property valued at over Rs 100 crore is up for grabs in ITBP, Whitefield , according to sources in the know. Kesarwala Industries' nine acre property in Whitefield valued at over Rs 108 crore is going under the hammer shortly, said an industry source.
There were 3,710 appeals filed at the DRT cell in Bangalore last year compared to 2,092 in 2009, according to sources in the tribunal.
Gulf spill: BP partner to pay $1.1 bn in settlement
LONDON: BP said on Friday that Moex Offshore, one of its partners in the oil well that leaked into the Gulf of Mexico last year, has agreed to pay $1.1 billion as part of a settlement for any claims related to the oil spill.
Moex, which had a 10% stake in the well, is the first company apart from BP to make a payment towards covering the costs of the disastrous oil spill, BP said. The agreed payment is about half of a total $2.1 billion BP had sought from Moex in monthly invoices for reimbursement of costs, including interest, according to Mitsui of Japan, which owns Moex.
The settlement covers all claims related to the well accident and would immediately go to the $20 billion trust that was set up to compensate fishermen and other local residents and businesses that were affected by the oil spill, BP said. "Moex is the first company to join BP in helping to meet our shared responsibilities in the gulf," the BP chief executive , Robert W Dudley, said. "This settlement is an important step forward for BP and the gulf communities."
BP set aside $40 billion to cover costs and liabilities linked to the oil spill, the worst ever in the US. The London-based firm has already raised $25 billion by selling assets and is seeking to sell some more oil and gas fields in Britain and two refineries in the US. So far BP has paid almost $6 billion in claims. Dudley called "on the other parties involved in the Macondo well to follow the lead." The April 20, 2010, explosion of the rig killed 11 workers and resulted in a spill that poured nearly five million barrels of oil into the Gulf of Mexico . Since the accident companies involved in the well—BP , Transocean, which operated the rig, and Halliburton, which was responsible for cement work at the well—have engaged in recriminations and lawsuits, with each accusing the others of negligence. BP has filed claims worth tens of billions of dollars against Transocean and other partners in the US.
BP said it was in talks with its other partners on the well to also "contribute appropriately ," It was also seeking payments from Anadarko, which owned a quarter of the project, BP said. NYT NEWS SERVICE
Moex, which had a 10% stake in the well, is the first company apart from BP to make a payment towards covering the costs of the disastrous oil spill, BP said. The agreed payment is about half of a total $2.1 billion BP had sought from Moex in monthly invoices for reimbursement of costs, including interest, according to Mitsui of Japan, which owns Moex.
The settlement covers all claims related to the well accident and would immediately go to the $20 billion trust that was set up to compensate fishermen and other local residents and businesses that were affected by the oil spill, BP said. "Moex is the first company to join BP in helping to meet our shared responsibilities in the gulf," the BP chief executive , Robert W Dudley, said. "This settlement is an important step forward for BP and the gulf communities."
BP set aside $40 billion to cover costs and liabilities linked to the oil spill, the worst ever in the US. The London-based firm has already raised $25 billion by selling assets and is seeking to sell some more oil and gas fields in Britain and two refineries in the US. So far BP has paid almost $6 billion in claims. Dudley called "on the other parties involved in the Macondo well to follow the lead." The April 20, 2010, explosion of the rig killed 11 workers and resulted in a spill that poured nearly five million barrels of oil into the Gulf of Mexico . Since the accident companies involved in the well—BP , Transocean, which operated the rig, and Halliburton, which was responsible for cement work at the well—have engaged in recriminations and lawsuits, with each accusing the others of negligence. BP has filed claims worth tens of billions of dollars against Transocean and other partners in the US.
BP said it was in talks with its other partners on the well to also "contribute appropriately ," It was also seeking payments from Anadarko, which owned a quarter of the project, BP said. NYT NEWS SERVICE
Thursday, May 19, 2011
Markets open strong
The markets opened on a positive note with the Sensex up 61 points at 18,202 and the Nifty gained 15 points to start the day at 5,443. In the broader markets, the midcaps opened higher by 0.6% and the smallcap index gained 0.4%. However, the broader markets are underperforming when compared to the BSE benchmark index which is up 0.9%.
All the sectoral indices opened in the green for the day. Capital Goods and Bankex indices are leading the opening gains closely followed by Auto and Power. On the other hand, IT and FMCG, the movers on the previous day are the laggards in starting trades.The movers in the Capital goods space are L&T up 4%, Alstom Projects,Crompton Greaves and Havells India gaining between 1.5% -2%.
There are no losers among the Sensex-30 stocks in the opening trades.
The top gainers among the Sensex stocks are L&T up nearly 4% on the back of stellar Q4 numbers followed by Bajaj Auto, Bharti Airtel, Hindalco, Reliance Infrastructure, ONGC, Reliance Communication, HDFC and Hero Honda gaining between 1-2%
The market breadth is very positive. Of the total 1744 syocks traded on the BSE, 1101 stocks have advanced while 559 declined.
All the sectoral indices opened in the green for the day. Capital Goods and Bankex indices are leading the opening gains closely followed by Auto and Power. On the other hand, IT and FMCG, the movers on the previous day are the laggards in starting trades.The movers in the Capital goods space are L&T up 4%, Alstom Projects,Crompton Greaves and Havells India gaining between 1.5% -2%.
There are no losers among the Sensex-30 stocks in the opening trades.
The top gainers among the Sensex stocks are L&T up nearly 4% on the back of stellar Q4 numbers followed by Bajaj Auto, Bharti Airtel, Hindalco, Reliance Infrastructure, ONGC, Reliance Communication, HDFC and Hero Honda gaining between 1-2%
The market breadth is very positive. Of the total 1744 syocks traded on the BSE, 1101 stocks have advanced while 559 declined.
Capital goods, bank lift Sensex up 173 points
The BSE benchmark Sensex jumped over 170 points in the morning trade today as funds and retail investors enlarged their positions, taking cues from a firming trend in other Asian bourses.
At 9.45 a.m., the Sensex was up 173.42 points or 0.96 per cent at 18,314.82 and the Nifty up 50.55 points or 0.93 per cent at 5,478.65.
Volume toppers during the session were L&T, SBI, RIL, Tata Steel and ICICI Bank. Major Sensex gainers were L&T, ICICI Bank, HDFC, RIL, Bharti Airtel, ONGC and SBI. Infosys, HDFC Bank and Tata Steel were the major losers.
All the sectoral indices were trading in green. Among them, capital goods was up 2.43 per cent, bankex 1.00 per cent, auto 0.96 per cent and power 0.85. Of the total 1,675 stocks traded, 1,083 advanced, 512 declined and 80 remained unchanged.
In the opening session, the 30-share BSE index, which gained 55.2 points on Thursday, moved up further by 77.10 points to 18,218.50. Similarly, the broad-based National Stock Exchange Nifty index rose 25.7 points to 5,453.80.
Besides a firming trend in other Asian bourses, easing food inflation and a decline in crude oil prices in the global market also boosted the domestic trading sentiment.
Meanwhile in other Asian markets, Hong Kong’s Hang Seng index was trading up by 0.24 per cent, while Japan’s Nikkei edged higher by 0.29 per cent in the morning trade. The US Dow Jones Industrial average ended 0.36 per cent higher on Thursday.
At 9.45 a.m., the Sensex was up 173.42 points or 0.96 per cent at 18,314.82 and the Nifty up 50.55 points or 0.93 per cent at 5,478.65.
Volume toppers during the session were L&T, SBI, RIL, Tata Steel and ICICI Bank. Major Sensex gainers were L&T, ICICI Bank, HDFC, RIL, Bharti Airtel, ONGC and SBI. Infosys, HDFC Bank and Tata Steel were the major losers.
All the sectoral indices were trading in green. Among them, capital goods was up 2.43 per cent, bankex 1.00 per cent, auto 0.96 per cent and power 0.85. Of the total 1,675 stocks traded, 1,083 advanced, 512 declined and 80 remained unchanged.
In the opening session, the 30-share BSE index, which gained 55.2 points on Thursday, moved up further by 77.10 points to 18,218.50. Similarly, the broad-based National Stock Exchange Nifty index rose 25.7 points to 5,453.80.
Besides a firming trend in other Asian bourses, easing food inflation and a decline in crude oil prices in the global market also boosted the domestic trading sentiment.
Meanwhile in other Asian markets, Hong Kong’s Hang Seng index was trading up by 0.24 per cent, while Japan’s Nikkei edged higher by 0.29 per cent in the morning trade. The US Dow Jones Industrial average ended 0.36 per cent higher on Thursday.
Cairn and Vedanta agree open-ended deadline
Cairn Energy has extended the deadline for completing the $9.6bn (£5.9bn) sale of its Indian unit to Vedanta, the London-listed, Indian-focused mining company, while awaiting New Delhi’s blessing for the deal.
In a statement, the British oil explorer said it was not setting any new deadline but that the two companies had agreed to “extend the closing date on their sale and purchase agreement in order to secure the necessary consents and approvals from the government of India to complete the transaction”.
At Thursday’s annual meeting in Edinburgh Sir Bill Gammell, Cairn’s founder and chief executive, told shareholders he “hoped to get a satisfactory conclusion in a short period of time”. He added: “In India you need the three P’s: positive, patience and perseverance.”
In August Cairn agreed to sell to Vedanta – the metals mining company founded by the self-made, Indian-born billionaire Anil Agarwal – up to a 51 per cent stake in its strategically important Rajasthan oilfields. But the deal became bogged down by the process of obtaining government clearance, due to an unresolved royalty dispute between Cairn and the state-owned Oil and Natural Gas Company, a joint venture partner in the Rajasthan fields.
The Congress-led government is to decide whether it should require a settlement of the dispute as a precursor to the sale, or rather to allow Vedanta to take over the company, and then to let ONGC contend with the new owners to settle the dispute.
New Delhi has been dithering over a decision, forcing Cairn and Vedanta to repeatedly extend their deadline for closing the deal. Sir Bill had previously described the proposed sale as a litmus test of whether foreign companies can actually exit from Indian investments in a time and manner of their choosing.
The two companies had hoped New Delhi’s cabinet committee on economic affairs was poised to make a decision in early April. Instead, the cabinet referred the issue to a group of ministers, which has yet to meet but is expected to do so later this month, prompting the latest extension. The last deadline was due to expire on May 20.
Over the past month, Vedanta has acquired an 18.5 per cent stake in Cairn India, picking up a 10.3 per cent stake in a block deal with Malaysia’s Petronas, and another 8.1 per cent holding by a mandatory open offer to minority shareholders of Cairn India.
The companies have agreed that Cairn will sell a 40 per cent sake to Vedanta, retaining a 21.7 per cent interest in the business.
In a statement, the British oil explorer said it was not setting any new deadline but that the two companies had agreed to “extend the closing date on their sale and purchase agreement in order to secure the necessary consents and approvals from the government of India to complete the transaction”.
At Thursday’s annual meeting in Edinburgh Sir Bill Gammell, Cairn’s founder and chief executive, told shareholders he “hoped to get a satisfactory conclusion in a short period of time”. He added: “In India you need the three P’s: positive, patience and perseverance.”
In August Cairn agreed to sell to Vedanta – the metals mining company founded by the self-made, Indian-born billionaire Anil Agarwal – up to a 51 per cent stake in its strategically important Rajasthan oilfields. But the deal became bogged down by the process of obtaining government clearance, due to an unresolved royalty dispute between Cairn and the state-owned Oil and Natural Gas Company, a joint venture partner in the Rajasthan fields.
The Congress-led government is to decide whether it should require a settlement of the dispute as a precursor to the sale, or rather to allow Vedanta to take over the company, and then to let ONGC contend with the new owners to settle the dispute.
New Delhi has been dithering over a decision, forcing Cairn and Vedanta to repeatedly extend their deadline for closing the deal. Sir Bill had previously described the proposed sale as a litmus test of whether foreign companies can actually exit from Indian investments in a time and manner of their choosing.
The two companies had hoped New Delhi’s cabinet committee on economic affairs was poised to make a decision in early April. Instead, the cabinet referred the issue to a group of ministers, which has yet to meet but is expected to do so later this month, prompting the latest extension. The last deadline was due to expire on May 20.
Over the past month, Vedanta has acquired an 18.5 per cent stake in Cairn India, picking up a 10.3 per cent stake in a block deal with Malaysia’s Petronas, and another 8.1 per cent holding by a mandatory open offer to minority shareholders of Cairn India.
The companies have agreed that Cairn will sell a 40 per cent sake to Vedanta, retaining a 21.7 per cent interest in the business.
Business barometer shows brightening outlook
Twice as many business leaders say that the world economy is going to improve in the next six months than think it is going to get worse, according to the FT/Economist global business barometer.
The bullish sentiment expressed by international executives was moderated by fears about the effect of the eurozone crisis, as well as the impact of rising oil and commodity prices.
The new quarterly survey of more than 1,500 executives, conducted for The Economist and the Financial Times by the Economist Intelligence Unit, showed 38 per cent thought the global economy would pick up in the next six months and 19 per cent thought it would deteriorate, giving a balance of 19 per cent who were optimistic about the future. That compares with a balance of almost 40 per cent of executives who foresaw a worsening of the global economy in a similar survey in September 2008, during the early stages of the financial crisis.
Agribusiness, energy and manufacturing executives seemed to be the most hopeful about the future, while transport, health and pharmaceuticals and construction were the most downbeat sectors.
While the business environment appears relatively good in the near future, nearly two-thirds of executives were worried the worst was yet to come in the eurozone’s sovereign debt crisis, indicating a low level of confidence that official efforts have come close to delivering a solution.
Businesses also appeared concerned about high inflation and the prospect of interest rate rises by central banks round the world.
Rising oil prices, higher interest rates and increases in other commodity prices were ranked as the top three concerns of businesses in the next six months, with about 40 per cent of executives concerned about each.
Business people seemed to be confident about the performance of their own companies, with many saying they could perform better than their industry as a whole. A balance of 25 per cent of executives thought their industry would see improving conditions in the next six months, while 50 per cent thought their own companies would do better.
the discrepancy between executives’ views of the state of their industry was greatest in consumer goods, where a modest balance of 14 per cent thought the sector would see conditions improve but 61 per cent saw better times at their own companies.
The outlook for employment was encouraging, with only 13 per cent of executives expecting job cuts in the next year and stronger hiring expected in North America. But the survey adds to the sense US companies are holding on to large piles of cash instead of committing capital to expand their businesses. Whereas less than a quarter of companies outside North America said they would sit on surplus cash rather than pay it out to shareholders or use it for acquisitions in the next year, in North America a third of companies said they planned to retain extra cash – the highest proportion for any region of the world.
The bullish sentiment expressed by international executives was moderated by fears about the effect of the eurozone crisis, as well as the impact of rising oil and commodity prices.
The new quarterly survey of more than 1,500 executives, conducted for The Economist and the Financial Times by the Economist Intelligence Unit, showed 38 per cent thought the global economy would pick up in the next six months and 19 per cent thought it would deteriorate, giving a balance of 19 per cent who were optimistic about the future. That compares with a balance of almost 40 per cent of executives who foresaw a worsening of the global economy in a similar survey in September 2008, during the early stages of the financial crisis.
Agribusiness, energy and manufacturing executives seemed to be the most hopeful about the future, while transport, health and pharmaceuticals and construction were the most downbeat sectors.
While the business environment appears relatively good in the near future, nearly two-thirds of executives were worried the worst was yet to come in the eurozone’s sovereign debt crisis, indicating a low level of confidence that official efforts have come close to delivering a solution.
Businesses also appeared concerned about high inflation and the prospect of interest rate rises by central banks round the world.
Rising oil prices, higher interest rates and increases in other commodity prices were ranked as the top three concerns of businesses in the next six months, with about 40 per cent of executives concerned about each.
Business people seemed to be confident about the performance of their own companies, with many saying they could perform better than their industry as a whole. A balance of 25 per cent of executives thought their industry would see improving conditions in the next six months, while 50 per cent thought their own companies would do better.
the discrepancy between executives’ views of the state of their industry was greatest in consumer goods, where a modest balance of 14 per cent thought the sector would see conditions improve but 61 per cent saw better times at their own companies.
The outlook for employment was encouraging, with only 13 per cent of executives expecting job cuts in the next year and stronger hiring expected in North America. But the survey adds to the sense US companies are holding on to large piles of cash instead of committing capital to expand their businesses. Whereas less than a quarter of companies outside North America said they would sit on surplus cash rather than pay it out to shareholders or use it for acquisitions in the next year, in North America a third of companies said they planned to retain extra cash – the highest proportion for any region of the world.
No takers for Barclays credit card biz
MUMBAI: Barclays India , which has put its credit cards business on the block, is yet to find any taker, even though the bank has offered a huge discount, according to bankers who were approached for the sale.
The UK-headquartered bank, which is now scaling down its retail business in India after a pile-up of bad loans disbursed over three years ago before the slowdown in the economy, has also been restructuring its small and medium enterprises business. "Barclays' card business is being offered at a huge discount but there are no takers in the market," said the chief executive officer of a private sector bank who was offered the portfolio. A Barclays spokesperson in an email statement to ET said, as a global bank it keeps all its businesses under strategic review.
"We are reviewing options for cards, a business which requires scale and which may be able to achieve that scale under a new ownership," a spokesperson said.
According to banking industry estimates, Barclays has a card base of about 2.5 million. However, ET could not verify this number independently. In its annual report for 2010, Barclays had said it would focus on those areas where it can be top tier in the minds of clients and deliver good returns such as high net-worth business in wealth and equities and advisory business in investment banking.
Barclays, which launched its consumer banking operations with much fanfare in May 2007, saw a spike in non-performing loans on aggressive customer acquisition. The bank has been consolidating its consumer banking book since 2009. According to the last published financials, the bank has shrunk its advances book by 28.30% to 7,565 crore at the end of March 2010 against 10,551 crore in March 2009. Its net non-performing loans rose to 5.15% at the end of March 2010 compared with 4.59% last year, said the RBI publication profile of banks.
The bank has reduced its employee strength by 451 personnel to 1,083 executives at the end of March 2010 against 1,534 employees in the previous year. In 2007-08, the bank had around 2,078 employees, according to the data.
"For corporate banking, our focus is on the large corporate, MNC and financial institution customer base. As a result, the SME coverage currently conducted within corporate banking will reduce and wherever possible, the staff will be deployed elsewhere within Barclays," the spokesperson said. On the retail banking side, the bank said it will continue to focus on the mass affluent customers through a wide range of lending, deposit, investment and insurance products.
The bank's NBFC, Barclays Investments & Loans India, or Barclays Investments, is also reeling under losses. The bank, like other foreign banks, had floated the NBFC to improve its branch penetration. The NBFC offers unsecured loans, loans against shares and loans against property.
Crisil in its rating rationale on the NBFC said: "Barclays Investments' standalone credit risk profile is constrained by its weak asset quality and earnings profile. In the personal loans segment the 90+days past due loans were at a high level of 11% of advances as on December 31, 2010, albeit much improved from the peak levels of 18.1% as on December 2009."
The UK-headquartered bank, which is now scaling down its retail business in India after a pile-up of bad loans disbursed over three years ago before the slowdown in the economy, has also been restructuring its small and medium enterprises business. "Barclays' card business is being offered at a huge discount but there are no takers in the market," said the chief executive officer of a private sector bank who was offered the portfolio. A Barclays spokesperson in an email statement to ET said, as a global bank it keeps all its businesses under strategic review.
"We are reviewing options for cards, a business which requires scale and which may be able to achieve that scale under a new ownership," a spokesperson said.
According to banking industry estimates, Barclays has a card base of about 2.5 million. However, ET could not verify this number independently. In its annual report for 2010, Barclays had said it would focus on those areas where it can be top tier in the minds of clients and deliver good returns such as high net-worth business in wealth and equities and advisory business in investment banking.
Barclays, which launched its consumer banking operations with much fanfare in May 2007, saw a spike in non-performing loans on aggressive customer acquisition. The bank has been consolidating its consumer banking book since 2009. According to the last published financials, the bank has shrunk its advances book by 28.30% to 7,565 crore at the end of March 2010 against 10,551 crore in March 2009. Its net non-performing loans rose to 5.15% at the end of March 2010 compared with 4.59% last year, said the RBI publication profile of banks.
The bank has reduced its employee strength by 451 personnel to 1,083 executives at the end of March 2010 against 1,534 employees in the previous year. In 2007-08, the bank had around 2,078 employees, according to the data.
"For corporate banking, our focus is on the large corporate, MNC and financial institution customer base. As a result, the SME coverage currently conducted within corporate banking will reduce and wherever possible, the staff will be deployed elsewhere within Barclays," the spokesperson said. On the retail banking side, the bank said it will continue to focus on the mass affluent customers through a wide range of lending, deposit, investment and insurance products.
The bank's NBFC, Barclays Investments & Loans India, or Barclays Investments, is also reeling under losses. The bank, like other foreign banks, had floated the NBFC to improve its branch penetration. The NBFC offers unsecured loans, loans against shares and loans against property.
Crisil in its rating rationale on the NBFC said: "Barclays Investments' standalone credit risk profile is constrained by its weak asset quality and earnings profile. In the personal loans segment the 90+days past due loans were at a high level of 11% of advances as on December 31, 2010, albeit much improved from the peak levels of 18.1% as on December 2009."
Scooters India divestment okayed
NEW DELHI: The Union Cabinet on Thursday gave an uncontested green signal to the disinvestment of Scooters India (SIL) but found itself saddled with political concerns from the ruling Congress. The Centre gave its nod to divest its entire 95% equity to a joint venture partner to revive SIL. The proposal from heavy industries ministry went through smoothly, marking the first strategic sale in UPA's tenure since 2004. The proposal elicited immediate response with Atul Auto, a Rajkot-based three-wheeler maker, expressing interest.
Market watchers say others such as Bajaj Auto and Mahindra & Mahindra may also eye the PSU.
Sources said following the unobstructed nod, heavy industries minister Praful Patel informed the PM-chaired session that he wanted to place on record the reservations expressed by Uttar Pradesh Congress chief Rita Joshi. Opposing the proposal, Joshi had told Patel that he should not accept the proposal in an election year, only to be told that it was way past the stage where it could be recalled. But the information about Joshi's resistance met with Cabinet's casual acknowledgement, sending SIL on the way to divestment. The Centre will now scout for a strategic partner which can turn around the company making three-wheelers to a successful two-wheeler manufacturer.
Joshi's concern appeared political, fearing that divestment could trigger fears among employees and provoke popular angst ahead of state elections.
The UPCC chief told TOI, "I spoke to Praful Patel when I came to know about the proposal being on the agenda. He promised to put my view before the Cabinet." The poll season, for which Congress sounded the bugle at its two-day Varanasi conference which ended on Thursday, has often met with scepticism among voters. However, the government is sure that SIL needs a resourceful private giant for reviving the sick unit which has been incurring operational losses since 2002 and net losses since 2006.
The government justified it by saying, "This (losses) is mainly on account of its inherent inefficiency and low productivity as compared to other players in a highly competitive three-wheeler market. SIL also suffers disadvantage of its old plant, machinery, lack of technology, aging workforce, poor systems etc." But it assured that employees would continue to get salary support. SIL employs 1,255 persons though the strategic partner would offer VRS to 900 workers.
There have been two views in Congress about SIL's divestment, with a section feeling that successful stake sale could raise hopes about the permanently sick unit which could then be flagged as a success in the heart of the state up for polls. It would mark a businesslike intent for Congress, desperate to make its presence felt on Mayawati's turf.
Market watchers say others such as Bajaj Auto and Mahindra & Mahindra may also eye the PSU.
Sources said following the unobstructed nod, heavy industries minister Praful Patel informed the PM-chaired session that he wanted to place on record the reservations expressed by Uttar Pradesh Congress chief Rita Joshi. Opposing the proposal, Joshi had told Patel that he should not accept the proposal in an election year, only to be told that it was way past the stage where it could be recalled. But the information about Joshi's resistance met with Cabinet's casual acknowledgement, sending SIL on the way to divestment. The Centre will now scout for a strategic partner which can turn around the company making three-wheelers to a successful two-wheeler manufacturer.
Joshi's concern appeared political, fearing that divestment could trigger fears among employees and provoke popular angst ahead of state elections.
The UPCC chief told TOI, "I spoke to Praful Patel when I came to know about the proposal being on the agenda. He promised to put my view before the Cabinet." The poll season, for which Congress sounded the bugle at its two-day Varanasi conference which ended on Thursday, has often met with scepticism among voters. However, the government is sure that SIL needs a resourceful private giant for reviving the sick unit which has been incurring operational losses since 2002 and net losses since 2006.
The government justified it by saying, "This (losses) is mainly on account of its inherent inefficiency and low productivity as compared to other players in a highly competitive three-wheeler market. SIL also suffers disadvantage of its old plant, machinery, lack of technology, aging workforce, poor systems etc." But it assured that employees would continue to get salary support. SIL employs 1,255 persons though the strategic partner would offer VRS to 900 workers.
There have been two views in Congress about SIL's divestment, with a section feeling that successful stake sale could raise hopes about the permanently sick unit which could then be flagged as a success in the heart of the state up for polls. It would mark a businesslike intent for Congress, desperate to make its presence felt on Mayawati's turf.
Modern retail makes a big splash
MUMBAI: Modern retail has doubled its share to 10% of the Indian retail landscape in just three years. Its contribution has gone up from 5% in 2007 to 10% in 2010, according to internal estimates by the country's largest consumer products company, Hindustan Unilever (HUL). While this reduces the general trade pie to 90%, experts said general trade would continue to remain large.
In a presentation of investors, HUL said modern trade's presence in major cities like Hyderabad, Gurgaon, Bangalore and Chennai, is even higher, at an average of approximately 30% of the total retail pie. This, said marketers, is a pointer to a change in consumption pattern. "The contribution of modern trade to the overall retail pie especially in tier-1 towns has become extremely significant in the last couple of years. New categories like juices and mouthwashes are being discovered at a modern trade outlet, but that does not mean a family is not purchasing anything from its nearby general trade store," said Damodar Mall, president, integrated food strategy, Future Group, which runs the country's biggest modern retail store Big Bazaar.
Modern trade, said Mall, exists more like a first port of call for consumers where they experiment with new products. As demand increases, it positively impacts general trade as well. The platform is being used by FMCG companies for demand creation, especially for new categories. "Earlier a consumer would switch from Lux soap to Dove in a longer period of time. Today, such a transition takes place in six months with the help of television and modern trade and it helps the company, modern trade and general trade all at the same time," said Mall.
FMCG companies are assiduously devising strategies for modern retail. HUL has begun to measure the health of its brands based on the market shares they have in modern retail, even though it continues to enjoy strong leadership positions in most of the categories in general trade as well. "It is heartening that our modern trade market shares are even higher than our shares in general trade across categories. We have grown share in 85% of our categories in modern trade in 2010 and also grown in aggregate share in modern trade over 2009," said Hemant Bakshi, executive director, sales and customer development, HUL.
HUL was one of the first FMCG companies to set up a dedicated modern trade account management team in 2003. It also ensures that its plans are aligned with customers' needs, besides investing in building people capabilities.
"We have leveraged Unilever's learnings from across markets and deployed the best-in-class practices that we use globally. Our ambition is not only to be the largest supplier for modern trade but also to be the most preferred," said Bakshi.
Studies suggest that while a majority of consumers in metropolitan India are as global in orientation as those at the higher end of the consumption cycle, consumers residing in towns beyond metros are also increasingly opening up to spend for a better lifestyle. "As far as tier-2 and tier-3 towns go we have had strong acceptance through Big Bazaar even for value added products. In fact, modern trade helps bring about distribution in small places for products which did not exist there before," said Mall.
A PricewaterhouseCoopers survey estimates the size of the Indian retailing industry at $350 billion. "The Indian retailing industry is at an inflection point. It is set to enter a new growth trajectory owing to rising household consumption and the entry of corporate entities and global retailers," the report said. With the sector growing at 30-40% per annum, most global brands/retailers have evinced an interest in entering the market.
While the retail sector is yet to be liberalized, the government has taken a step in this direction by allowing a maximum of 51% equity participation by foreign companies in a joint venture with an Indian company.
In a presentation of investors, HUL said modern trade's presence in major cities like Hyderabad, Gurgaon, Bangalore and Chennai, is even higher, at an average of approximately 30% of the total retail pie. This, said marketers, is a pointer to a change in consumption pattern. "The contribution of modern trade to the overall retail pie especially in tier-1 towns has become extremely significant in the last couple of years. New categories like juices and mouthwashes are being discovered at a modern trade outlet, but that does not mean a family is not purchasing anything from its nearby general trade store," said Damodar Mall, president, integrated food strategy, Future Group, which runs the country's biggest modern retail store Big Bazaar.
Modern trade, said Mall, exists more like a first port of call for consumers where they experiment with new products. As demand increases, it positively impacts general trade as well. The platform is being used by FMCG companies for demand creation, especially for new categories. "Earlier a consumer would switch from Lux soap to Dove in a longer period of time. Today, such a transition takes place in six months with the help of television and modern trade and it helps the company, modern trade and general trade all at the same time," said Mall.
FMCG companies are assiduously devising strategies for modern retail. HUL has begun to measure the health of its brands based on the market shares they have in modern retail, even though it continues to enjoy strong leadership positions in most of the categories in general trade as well. "It is heartening that our modern trade market shares are even higher than our shares in general trade across categories. We have grown share in 85% of our categories in modern trade in 2010 and also grown in aggregate share in modern trade over 2009," said Hemant Bakshi, executive director, sales and customer development, HUL.
HUL was one of the first FMCG companies to set up a dedicated modern trade account management team in 2003. It also ensures that its plans are aligned with customers' needs, besides investing in building people capabilities.
"We have leveraged Unilever's learnings from across markets and deployed the best-in-class practices that we use globally. Our ambition is not only to be the largest supplier for modern trade but also to be the most preferred," said Bakshi.
Studies suggest that while a majority of consumers in metropolitan India are as global in orientation as those at the higher end of the consumption cycle, consumers residing in towns beyond metros are also increasingly opening up to spend for a better lifestyle. "As far as tier-2 and tier-3 towns go we have had strong acceptance through Big Bazaar even for value added products. In fact, modern trade helps bring about distribution in small places for products which did not exist there before," said Mall.
A PricewaterhouseCoopers survey estimates the size of the Indian retailing industry at $350 billion. "The Indian retailing industry is at an inflection point. It is set to enter a new growth trajectory owing to rising household consumption and the entry of corporate entities and global retailers," the report said. With the sector growing at 30-40% per annum, most global brands/retailers have evinced an interest in entering the market.
While the retail sector is yet to be liberalized, the government has taken a step in this direction by allowing a maximum of 51% equity participation by foreign companies in a joint venture with an Indian company.
Wednesday, May 18, 2011
Sensex up 112 points in opening trade
MUMBAI: The Bombay Stock Exchange benchmark Sensex recovered by over 112 points in opening trade on Thursday on fresh buying in metals, banking and oil and gas stocks, driven by a firming trend on other Asian bourses.
The 30-share barometer, which has lost nearly 445 points in the previous three sessions, rose by 112.25 points to 18,198.45 in the first few minutes of trade today.
In a similar manner, the wide-based National Stock Exchange Nifty index rose by 32 points to 5,452.60.
Brokers said the emergence of buying in heavy-weight stocks by funds as well as retail investors was triggered by a firming trend in other Asian markets following overnight gains in the US, which gave a boost to the trading sentiment.
In the Asian region, Hong Kong's Hang Seng index rose by 0.25 per cent, while Japan's Nikkei edged higher by 0.51 per cent in morning trade today. The US Dow Jones Industrial Average ended 0.65 per cent higher in yesterday's trade.
The 30-share barometer, which has lost nearly 445 points in the previous three sessions, rose by 112.25 points to 18,198.45 in the first few minutes of trade today.
In a similar manner, the wide-based National Stock Exchange Nifty index rose by 32 points to 5,452.60.
Brokers said the emergence of buying in heavy-weight stocks by funds as well as retail investors was triggered by a firming trend in other Asian markets following overnight gains in the US, which gave a boost to the trading sentiment.
In the Asian region, Hong Kong's Hang Seng index rose by 0.25 per cent, while Japan's Nikkei edged higher by 0.51 per cent in morning trade today. The US Dow Jones Industrial Average ended 0.65 per cent higher in yesterday's trade.
The Infosys way of creating millionaires
Infosys Technologies Ltd has given away stock options worth Rs 50,000 crore, or over $10.5 billion (at current market prices), to its employees since its inception 30 years ago.
“I do not think any other company has given away” so much of shares to its employees, said Mr N. R. Narayana Murthy, Chairman and Chief Mentor, Infosys, in his last article, in the company's annual report for 2010-11. Every Indian employee at every level who joined the company on or before March 2010 is a stakeholder of Infosys.
ESOPs
The IT giant had put in place the 1994 Employees Stock Option Scheme (ESOP), which along with the 1998 American Depository Receipt scheme and the 1999 scheme, gave shares to over 18,000 employees. This created hundreds of dollar millionaires and thousands of rupee millionaires. Drivers, office assistants and secretaries got shares along with others and became millionaires. It soon became the most successful scheme in India and set a benchmark for other companies.
“It [ESOP] gave us a unique positioning, democratised wealth and suddenly the professionals realised that they too could become wealthy by ethical means early in their careers,” Infosys' annual report said.
The 1994 ESOP scheme was sought to be taxed in the hands of the employees and after a legal battle, the Supreme Court held in 2008 that the scheme did not create a taxable event, allowing all grantees the benefit of no tax, helped the course by the abolition of capital gains tax on sale provided the shares are held for more than 12 months.
Completing 30 years
Come July 2, Infosys will be a 30-year-old IT company, which was incorporated on July 2, 1981, with Mr Narayana Murthy borrowing Rs 10,000 from his wife. The company has now a balance-sheet of Rs 26,000 crore with Rs 11,623 crore paid out as dividend, according to the annual report.
Since inception it has been a remarkable journey so far for Infosys in all major factors. In the last 30 years, the company has grown from 50 customers to 620 customers; from 10 projects to 6,500 projects; from 100 employees to 1,30,820 employees; from 100 sq ft to 28 million sq ft; from 100 investors to nearly 4.50 lakh investors.
The company said that such a scalability exercise has been successful due to its PSPD (Predictability of revenue; sustainability of such predictability; profitability of such realised revenue and de-risking).
Separation
On separation from Infosys, Mr Murthy, who is retiring as the company's chairman and chief mentor on August 21, wrote: “The best analogy that I can think of for this separation between Infosys and me is that of one's daughter getting married and leaving her parents' home. Yes, the parents will be there when she needs them and they will be happy that she is starting a new life in an exciting new environment.”
“The Infosys journey has been an integral part of my life. Most of my colleagues say that Infosys is an inseparable part of me and I am an inseparable part of Infosys. I have been the number one actor in every major decision taken in the company,” he said.
Mr Murthy said: “It is not easy for me to write my last article in the annual report of the company. As I write this, a mosaic of images from the past whizzes through my mind. The list seems endless and it would be difficult to narrate them all in this article.”
“I do not think any other company has given away” so much of shares to its employees, said Mr N. R. Narayana Murthy, Chairman and Chief Mentor, Infosys, in his last article, in the company's annual report for 2010-11. Every Indian employee at every level who joined the company on or before March 2010 is a stakeholder of Infosys.
ESOPs
The IT giant had put in place the 1994 Employees Stock Option Scheme (ESOP), which along with the 1998 American Depository Receipt scheme and the 1999 scheme, gave shares to over 18,000 employees. This created hundreds of dollar millionaires and thousands of rupee millionaires. Drivers, office assistants and secretaries got shares along with others and became millionaires. It soon became the most successful scheme in India and set a benchmark for other companies.
“It [ESOP] gave us a unique positioning, democratised wealth and suddenly the professionals realised that they too could become wealthy by ethical means early in their careers,” Infosys' annual report said.
The 1994 ESOP scheme was sought to be taxed in the hands of the employees and after a legal battle, the Supreme Court held in 2008 that the scheme did not create a taxable event, allowing all grantees the benefit of no tax, helped the course by the abolition of capital gains tax on sale provided the shares are held for more than 12 months.
Completing 30 years
Come July 2, Infosys will be a 30-year-old IT company, which was incorporated on July 2, 1981, with Mr Narayana Murthy borrowing Rs 10,000 from his wife. The company has now a balance-sheet of Rs 26,000 crore with Rs 11,623 crore paid out as dividend, according to the annual report.
Since inception it has been a remarkable journey so far for Infosys in all major factors. In the last 30 years, the company has grown from 50 customers to 620 customers; from 10 projects to 6,500 projects; from 100 employees to 1,30,820 employees; from 100 sq ft to 28 million sq ft; from 100 investors to nearly 4.50 lakh investors.
The company said that such a scalability exercise has been successful due to its PSPD (Predictability of revenue; sustainability of such predictability; profitability of such realised revenue and de-risking).
Separation
On separation from Infosys, Mr Murthy, who is retiring as the company's chairman and chief mentor on August 21, wrote: “The best analogy that I can think of for this separation between Infosys and me is that of one's daughter getting married and leaving her parents' home. Yes, the parents will be there when she needs them and they will be happy that she is starting a new life in an exciting new environment.”
“The Infosys journey has been an integral part of my life. Most of my colleagues say that Infosys is an inseparable part of me and I am an inseparable part of Infosys. I have been the number one actor in every major decision taken in the company,” he said.
Mr Murthy said: “It is not easy for me to write my last article in the annual report of the company. As I write this, a mosaic of images from the past whizzes through my mind. The list seems endless and it would be difficult to narrate them all in this article.”
Expect a limited downside from here
Barring major surprises, the market is likely to remain range-bound over the next quarter, say experts.
Macro headwinds like rising interest rates, firm input costs (including metal and crude oil prices), slowing earnings growth and relatively higher valuations have taken a toll on domestic markets in recent months. They are likely to continue hurting the markets for some more time.
From being among the top 10 performers in calendar year 2010, the Indian market has been among the worst performers this year. But the bad news may end here. If experts are to be believed, the good news is that barring major unpleasant surprises, the markets may not go down significantly from current levels.
Ramesh Damani, member, BSE and a known investor, says: “Earnings have been decent. The total lack of retail participation and speculators moving to commodities has kept the stock markets range-bound. Interest rates are the biggest worry. The Sensex is likely to remain in range of 18,000-20,500. If at all it breaks out, I see it breaking upwards.”
UPSIDE CORRECTION?
The fact that the market is trading a little below its long-term average valuation of 15 times one-year forward earnings and that India Inc’s earnings in 2011-12 are seen growing at 12-15 per cent provides comfort that the downside could be limited from current levels.
Nilesh Shah, president, corporate banking, Axis Bank, says: “Today, a lot of bad news is already priced in, so we are seeing a range-bound movement. So, this is more of a time correction than a price correction.”
To answer the question on where the markets would bottom out, Manishi Raychaudhuri, managing director, BNP Paribas Securities, said in a report, “If we assume four per cent downside to our EPS estimates in FY12 and FY13, and the Sensex trading down to a 10 per cent discount to its long-term average (i.e to a PE of 13.5 times), it would imply a near-term ‘floor’ Sensex level of 17,000.”
For now, most experts believe that given the domestic macro concerns and uncertainties on the global front, the Indian market could remain range-bound for the next few months—at least, till inflation declines to comforting levels. This, they believe, is more likely to happen in the second half of calendar year 2011. In the interim, the investment cycle is expected to slow, as capital costs remain at elevated levels due to the many rate increases by the RBI.
Morgan Stanley India’s strategy report says the rate rises mean greater vigilance on private capex. "The downside risk is that capex slows, creating further supply bottlenecks as we head into 2012, and higher inflation – not a pleasant situation for equities. That said, a lot of these risks may be in the price of industrials. The Nifty remains in the 5,300-6,300 range, given the current macro.” In this scenario, how should investors position their portfolios? Here, experts believe individuals should focus on picking the right stocks than on themes.
Shah says: “This is a fairly priced market . There is not much to choose from a sector point of view with a big weight. Sectors where growth is visible have high valuations. Those with growth concerns have low valuations. Pharma stands out as a high visibility sector. Buyouts provide an inherent floor to the prices. The focus should be more on stock selection than sector selection. Free cash flow generating companies will be a better bet in the time ahead.”
With contributions from Sundaresha Subramanian & Malini Bhupta
Macro headwinds like rising interest rates, firm input costs (including metal and crude oil prices), slowing earnings growth and relatively higher valuations have taken a toll on domestic markets in recent months. They are likely to continue hurting the markets for some more time.
From being among the top 10 performers in calendar year 2010, the Indian market has been among the worst performers this year. But the bad news may end here. If experts are to be believed, the good news is that barring major unpleasant surprises, the markets may not go down significantly from current levels.
Ramesh Damani, member, BSE and a known investor, says: “Earnings have been decent. The total lack of retail participation and speculators moving to commodities has kept the stock markets range-bound. Interest rates are the biggest worry. The Sensex is likely to remain in range of 18,000-20,500. If at all it breaks out, I see it breaking upwards.”
UPSIDE CORRECTION?
The fact that the market is trading a little below its long-term average valuation of 15 times one-year forward earnings and that India Inc’s earnings in 2011-12 are seen growing at 12-15 per cent provides comfort that the downside could be limited from current levels.
Nilesh Shah, president, corporate banking, Axis Bank, says: “Today, a lot of bad news is already priced in, so we are seeing a range-bound movement. So, this is more of a time correction than a price correction.”
To answer the question on where the markets would bottom out, Manishi Raychaudhuri, managing director, BNP Paribas Securities, said in a report, “If we assume four per cent downside to our EPS estimates in FY12 and FY13, and the Sensex trading down to a 10 per cent discount to its long-term average (i.e to a PE of 13.5 times), it would imply a near-term ‘floor’ Sensex level of 17,000.”
For now, most experts believe that given the domestic macro concerns and uncertainties on the global front, the Indian market could remain range-bound for the next few months—at least, till inflation declines to comforting levels. This, they believe, is more likely to happen in the second half of calendar year 2011. In the interim, the investment cycle is expected to slow, as capital costs remain at elevated levels due to the many rate increases by the RBI.
Morgan Stanley India’s strategy report says the rate rises mean greater vigilance on private capex. "The downside risk is that capex slows, creating further supply bottlenecks as we head into 2012, and higher inflation – not a pleasant situation for equities. That said, a lot of these risks may be in the price of industrials. The Nifty remains in the 5,300-6,300 range, given the current macro.” In this scenario, how should investors position their portfolios? Here, experts believe individuals should focus on picking the right stocks than on themes.
Shah says: “This is a fairly priced market . There is not much to choose from a sector point of view with a big weight. Sectors where growth is visible have high valuations. Those with growth concerns have low valuations. Pharma stands out as a high visibility sector. Buyouts provide an inherent floor to the prices. The focus should be more on stock selection than sector selection. Free cash flow generating companies will be a better bet in the time ahead.”
With contributions from Sundaresha Subramanian & Malini Bhupta
Software exporters not to be denied credit for service tax on inputs in SEZs
NEW DELHI: The IT industry stands to gain hundreds of crores as the finance ministry has decided not to deny software exporters credit for service tax on inputs because they had operations both inside and outside special economic zones.
So far, the tax department has held that it could not determine if the input service was used in SEZ or not and denied them credit.
The Central Board Excise and Customs had issued a circular clarifying the issue on March 1.
The department has prescribed a new mechanism for claiming exemption on taxable services consumed in authorised operations within SEZs.
Service wholly consumed in a SEZ will be totally exempt from tax. Experts say the clarification is consistent with the SEZ laws.
"In an ideal situation, service supplies to SEZ should be treated as export and the principles determining exports should apply in this case," said Bipin Sapra, partner, Ernst & Young.
The SEZ Act exempts from tax services that are used in producing services or goods that are exported. Service tax is levied at the rate of 10% on over 100 services.
Services 'not wholly consumed' within the SEZ will be segregated into two categories i.e. services 'shared' between the SEZ and the regular operations, or technically domestic tariff area units, and services 'exclusively used' by the SEZ.
In these cases, there will not be any exemption but the units will be allowed to claim refund. If it is exclusively used for SEZ operation then full refund will be available.
On some services, the units located outside SEZs are not eligible for refunds. In these cases, SEZ unit will only be allowed refund on a proportionate basis depending on turnover.
The service tax refund rules were first notified in 2009 but have gone through many changes.
After providing for a blanket exemption to input services, the finance ministry switched to a refund mechanism for tax paid on services consumed in SEZs.
But subsequently it buckled under pressure from commerce department and spared units in SEZs from paying tax on services consumed inside the zones.
However, IT units located outside SEZs still had to claim tax refunds on services exported from the units located outside the zone.
Since most big software exporters have SEZ and non-SEZ operations, it created problem of identifying where an input service such as a software purchased by the company was being used.
So far, the tax department has held that it could not determine if the input service was used in SEZ or not and denied them credit.
The Central Board Excise and Customs had issued a circular clarifying the issue on March 1.
The department has prescribed a new mechanism for claiming exemption on taxable services consumed in authorised operations within SEZs.
Service wholly consumed in a SEZ will be totally exempt from tax. Experts say the clarification is consistent with the SEZ laws.
"In an ideal situation, service supplies to SEZ should be treated as export and the principles determining exports should apply in this case," said Bipin Sapra, partner, Ernst & Young.
The SEZ Act exempts from tax services that are used in producing services or goods that are exported. Service tax is levied at the rate of 10% on over 100 services.
Services 'not wholly consumed' within the SEZ will be segregated into two categories i.e. services 'shared' between the SEZ and the regular operations, or technically domestic tariff area units, and services 'exclusively used' by the SEZ.
In these cases, there will not be any exemption but the units will be allowed to claim refund. If it is exclusively used for SEZ operation then full refund will be available.
On some services, the units located outside SEZs are not eligible for refunds. In these cases, SEZ unit will only be allowed refund on a proportionate basis depending on turnover.
The service tax refund rules were first notified in 2009 but have gone through many changes.
After providing for a blanket exemption to input services, the finance ministry switched to a refund mechanism for tax paid on services consumed in SEZs.
But subsequently it buckled under pressure from commerce department and spared units in SEZs from paying tax on services consumed inside the zones.
However, IT units located outside SEZs still had to claim tax refunds on services exported from the units located outside the zone.
Since most big software exporters have SEZ and non-SEZ operations, it created problem of identifying where an input service such as a software purchased by the company was being used.
Investors can place bids in public issues at a discount
MUMBAI: Retail investors will be able to buy more shares of companies in public offerings, with the Securities and Exchange Board of India (Sebi) al-lowing them to place bids at a discounted price, instead of paying the full amount.
In the recent past, most state-owned companies which had launched either an IPO or a FPO had offered a 5% discount to retail investors. But the impact of such a differential pricing is felt by retail investors only at the time of allotment of shares and not at the time of filing an application. That is because investors have to pay the full amount up-front. Issuers refund the differential because of a discount only after the pricing is finalised.
"This takes away certain benefits from the investors such as lower cash outflow at a price net of discount and the ability to apply for more shares with the same cash outlay," Sebi said in a statement posted on its website on Wednesday.
A few bankers and analysts said that the Sebi move was investor friendly and will do away with the refund process, after the recent decision by the regulator to raise the investment limit to 2 lakh for retail investors. "Investors would block their money only for the discounted amount and they can now apply for greater number of shares," said Prithvi Haldea, managing director of Prime Database and a former member of Sebi's primary market advisory committee. "Issuers will benefit as the number of shares applied will go up," he said.
The regulator said merchant bankers will have to disclose the discounted price for retail investors in rupee terms and not in percentage in the offer document and application forms. They will also have to clearly disclose under what circumstances application for shares would be liable for rejection in case of errors. Investment bankers are worried about how to implement this proposal and on creating awareness about this among investors.
"This circular is taking care of only the top end of the band, pricing can happen at any point. Pricing is dynamic, this is not a very practical proposal and will take some time to settle," said a senior investment banker who declined to be identified.
The 6,000-7,000-crore SAIL follow-on offering, which is likely to hit the market next month may be the first issue where the discounted price would be disclosed in the offer document, said a banker handling the issue. Stock exchange platforms and syndicate banks, where bids are logged in, will have to change their software by making provisions for discount adjustment.
Registrars, who handle public offerings, say 30% of the retail applications for public offerings has been coming through Application Sup-ported by Blocked Amount (ASBA) - wherein the investors' application money will be debited from their bank account only after the shares are allotted. While 95% of the qualified institutional buyers and high net worth individuals bids come through ASBA.
In the recent past, most state-owned companies which had launched either an IPO or a FPO had offered a 5% discount to retail investors. But the impact of such a differential pricing is felt by retail investors only at the time of allotment of shares and not at the time of filing an application. That is because investors have to pay the full amount up-front. Issuers refund the differential because of a discount only after the pricing is finalised.
"This takes away certain benefits from the investors such as lower cash outflow at a price net of discount and the ability to apply for more shares with the same cash outlay," Sebi said in a statement posted on its website on Wednesday.
A few bankers and analysts said that the Sebi move was investor friendly and will do away with the refund process, after the recent decision by the regulator to raise the investment limit to 2 lakh for retail investors. "Investors would block their money only for the discounted amount and they can now apply for greater number of shares," said Prithvi Haldea, managing director of Prime Database and a former member of Sebi's primary market advisory committee. "Issuers will benefit as the number of shares applied will go up," he said.
The regulator said merchant bankers will have to disclose the discounted price for retail investors in rupee terms and not in percentage in the offer document and application forms. They will also have to clearly disclose under what circumstances application for shares would be liable for rejection in case of errors. Investment bankers are worried about how to implement this proposal and on creating awareness about this among investors.
"This circular is taking care of only the top end of the band, pricing can happen at any point. Pricing is dynamic, this is not a very practical proposal and will take some time to settle," said a senior investment banker who declined to be identified.
The 6,000-7,000-crore SAIL follow-on offering, which is likely to hit the market next month may be the first issue where the discounted price would be disclosed in the offer document, said a banker handling the issue. Stock exchange platforms and syndicate banks, where bids are logged in, will have to change their software by making provisions for discount adjustment.
Registrars, who handle public offerings, say 30% of the retail applications for public offerings has been coming through Application Sup-ported by Blocked Amount (ASBA) - wherein the investors' application money will be debited from their bank account only after the shares are allotted. While 95% of the qualified institutional buyers and high net worth individuals bids come through ASBA.
Hotel maid to testify, IMF chief Strauss-Kahn pressured to quit
NEW YORK/PARIS: A hotel maid who says IMF chief tried to rape her was due to testify before a New York grand jury on Wednesday, as the French presidential hopeful faced growing pressure to resign.
A lawyer for the 32-year-old African widow dismissed a suggestion by Strauss-Kahn's defence counsel that the incident at the luxury Times Square Sofitel last Saturday might not have been a sexual assault.
"There's nothing consensual about what took place in that hotel room," attorney Jeffrey Shapiro told NBC's "Today" show, adding he believed she would testify "at some point today".
The arrest dashed Strauss-Kahn's prospects for the French presidency and raised broader questions over the future of the International Monetary Fund. Developing countries, looking to a succession, have questioned Europe's hold on the post.
The United States, the IMF's biggest shareholder, said Strauss-Kahn was clearly unable to go on running the global lender from a prison cell, whatever the legal outcome.
"I can't comment on the case, but he is obviously not in a position to run the IMF," treasury secretary Timothy Geithner said on Tuesday, calling for an interim head to be named.
European Commission president Jose Manuel Barroso said Europe would naturally put forward a candidate to replace him if Strauss-Kahn decided to step down.
Germany, which wants a European to keep the job, said the IMF should deal with its immediate leadership internally and it was too early to discuss a successor to Strauss-Kahn.
French officials said John Lipsky, the IMF's American number two, whose term expires in August, would represent the Fund at next week's Group of Eight summit in Deauville, France.
China, Brazil and South Africa questioned Europe's right to the top job but Europeans said it made sense for them to retain the post while the Fund plays such a crucial role in helping to ease the euro zone debt crisis.
Strauss-Kahn, who denies the charges, is expected to remain in New York's Rikers Island jail, known for gang violence, at least until his next court appearance on Friday, when lawyers may again request bail. Any trial could be six months away.
If convicted, he could face 25 years in prison. A law enforcement source said he had been placed on suicide watch, but purely as a precautionary measure.
In the US legal system, a grand jury convenes in secret to hear evidence and decide whether to indict the defendant.
In the only public hint of Strauss-Kahn's possible line of defence, his attorney Benjamin Brafman told his arraignment hearing on Monday: "The evidence we believe will not be consistent with a forcible encounter."
However, Shapiro said his client, an asylum seeker from the West African nation of Guinea with a 15-year-old daughter, told Reuters she had not been aware of Strauss-Kahn's identity until a day after the alleged attack.
"She didn't have any idea who he was or have any prior dealings with this guy," the personal injury lawyer said.
"She wants to remain anonymous because she's very much afraid that something could happen to her physically, she feels very threatened by this," he said of the global attention.
SET-UP?
An opinion poll in France, taken before his first court appearance on Monday and released on Wednesday, showed that more than half the population believe Strauss-Kahn was set up.
The CSA poll found that 57 per cent of respondents thought that the Socialist politician, who had been frontrunner for the 2012 election, was definitely or probably the victim of a plot.
Fully 70 per cent of Socialist sympathisers took that view. Most French media have dismissed conspiracy theories.
The poll findings highlighted a cultural divide, with French Socialist politicians and commentators denouncing the public parading of Strauss-Kahn, unshaven and in handcuffs, before he has had a chance to defend himself.
New York mayor Michael Bloomberg agreed such a display was humiliating and would be unfair if a defendant were to be found innocent. "But if you don't want to do the 'perp walk', don't do the crime," he told reporters.
U.S. media have criticised the French for a tradition of secrecy on politicians' sex lives, and for showing more compassion for Strauss-Kahn than for the alleged rape victim, whose identity some French newspapers have published.
The French daily Liberation said the IMF chief had told its editors in off-record comments last month that he had just the right qualities to lead France, notably a calm manner, in contrast to conservative President Nicolas Sarkozy.
"Today I fit with everything the French people want -- recognised competence, calm, international experience," he was quoted as having said at an April 28 meeting.
EUROPEAN JOB
The IMF said it had not been in touch with Strauss-Kahn since his arrest but it would be important to do so "in due course". Two IMF board sources told Reuters the board would ask Strauss-Kahn whether he planned to continue in his post.
In Strauss-Kahn's absence, Lipsky is temporarily in charge of the institution which manages the world economy and is in the midst of helping euro zone states like Greece, Ireland and Portugal tackle debt woes.
The White House is considering proposing David Lipton, President Barack Obama's international economic adviser and a former deputy treasury secretary, to replace Lipsky, whose term ends in August, sources familiar with the matter said.
Strauss-Kahn began to lose European support on Tuesday.
"Given the situation, that bail has been denied, he has to consider that he would otherwise do damage to the institution," Austrian Finance Minister Maria Fekter said.
A European has held the post of managing director since the IMF was created in 1945, and four of them have been French.
French finance minister Christine Lagarde is thought to be interested in the post but her prospects have been clouded by a decision this month by a Paris public prosecutor to recommend a full-scale inquiry into her role in awarding financial compensation to a prominent businessman in 2008.
Emerging countries are starting to flex their muscle over who should succeed Strauss-Kahn, who had been expected to leave soon anyway to run for the French presidency.
China said on Tuesday the selection of the next IMF boss should be based on "fairness, transparency and merit". It marked the first time that the fund's third largest member has weighed in so publicly on an IMF selection debate.
South African finance minister Pravin Gordhan and a senior Brazilian government official, who asked not to be named, said the next chief should be from a developing country, pressing a case to give emerging economies a greater say in world affairs.
But Brazilian finance minister Guido Mantega said the affair should not be used to press for changes in the way the IMF head is picked, telling GloboNews TV the discussion "is too premature at this point" and Strauss-Kahn was "probably one of the best IMF chiefs that we had in the past years".
A lawyer for the 32-year-old African widow dismissed a suggestion by Strauss-Kahn's defence counsel that the incident at the luxury Times Square Sofitel last Saturday might not have been a sexual assault.
"There's nothing consensual about what took place in that hotel room," attorney Jeffrey Shapiro told NBC's "Today" show, adding he believed she would testify "at some point today".
The arrest dashed Strauss-Kahn's prospects for the French presidency and raised broader questions over the future of the International Monetary Fund. Developing countries, looking to a succession, have questioned Europe's hold on the post.
The United States, the IMF's biggest shareholder, said Strauss-Kahn was clearly unable to go on running the global lender from a prison cell, whatever the legal outcome.
"I can't comment on the case, but he is obviously not in a position to run the IMF," treasury secretary Timothy Geithner said on Tuesday, calling for an interim head to be named.
European Commission president Jose Manuel Barroso said Europe would naturally put forward a candidate to replace him if Strauss-Kahn decided to step down.
Germany, which wants a European to keep the job, said the IMF should deal with its immediate leadership internally and it was too early to discuss a successor to Strauss-Kahn.
French officials said John Lipsky, the IMF's American number two, whose term expires in August, would represent the Fund at next week's Group of Eight summit in Deauville, France.
China, Brazil and South Africa questioned Europe's right to the top job but Europeans said it made sense for them to retain the post while the Fund plays such a crucial role in helping to ease the euro zone debt crisis.
Strauss-Kahn, who denies the charges, is expected to remain in New York's Rikers Island jail, known for gang violence, at least until his next court appearance on Friday, when lawyers may again request bail. Any trial could be six months away.
If convicted, he could face 25 years in prison. A law enforcement source said he had been placed on suicide watch, but purely as a precautionary measure.
In the US legal system, a grand jury convenes in secret to hear evidence and decide whether to indict the defendant.
In the only public hint of Strauss-Kahn's possible line of defence, his attorney Benjamin Brafman told his arraignment hearing on Monday: "The evidence we believe will not be consistent with a forcible encounter."
However, Shapiro said his client, an asylum seeker from the West African nation of Guinea with a 15-year-old daughter, told Reuters she had not been aware of Strauss-Kahn's identity until a day after the alleged attack.
"She didn't have any idea who he was or have any prior dealings with this guy," the personal injury lawyer said.
"She wants to remain anonymous because she's very much afraid that something could happen to her physically, she feels very threatened by this," he said of the global attention.
SET-UP?
An opinion poll in France, taken before his first court appearance on Monday and released on Wednesday, showed that more than half the population believe Strauss-Kahn was set up.
The CSA poll found that 57 per cent of respondents thought that the Socialist politician, who had been frontrunner for the 2012 election, was definitely or probably the victim of a plot.
Fully 70 per cent of Socialist sympathisers took that view. Most French media have dismissed conspiracy theories.
The poll findings highlighted a cultural divide, with French Socialist politicians and commentators denouncing the public parading of Strauss-Kahn, unshaven and in handcuffs, before he has had a chance to defend himself.
New York mayor Michael Bloomberg agreed such a display was humiliating and would be unfair if a defendant were to be found innocent. "But if you don't want to do the 'perp walk', don't do the crime," he told reporters.
U.S. media have criticised the French for a tradition of secrecy on politicians' sex lives, and for showing more compassion for Strauss-Kahn than for the alleged rape victim, whose identity some French newspapers have published.
The French daily Liberation said the IMF chief had told its editors in off-record comments last month that he had just the right qualities to lead France, notably a calm manner, in contrast to conservative President Nicolas Sarkozy.
"Today I fit with everything the French people want -- recognised competence, calm, international experience," he was quoted as having said at an April 28 meeting.
EUROPEAN JOB
The IMF said it had not been in touch with Strauss-Kahn since his arrest but it would be important to do so "in due course". Two IMF board sources told Reuters the board would ask Strauss-Kahn whether he planned to continue in his post.
In Strauss-Kahn's absence, Lipsky is temporarily in charge of the institution which manages the world economy and is in the midst of helping euro zone states like Greece, Ireland and Portugal tackle debt woes.
The White House is considering proposing David Lipton, President Barack Obama's international economic adviser and a former deputy treasury secretary, to replace Lipsky, whose term ends in August, sources familiar with the matter said.
Strauss-Kahn began to lose European support on Tuesday.
"Given the situation, that bail has been denied, he has to consider that he would otherwise do damage to the institution," Austrian Finance Minister Maria Fekter said.
A European has held the post of managing director since the IMF was created in 1945, and four of them have been French.
French finance minister Christine Lagarde is thought to be interested in the post but her prospects have been clouded by a decision this month by a Paris public prosecutor to recommend a full-scale inquiry into her role in awarding financial compensation to a prominent businessman in 2008.
Emerging countries are starting to flex their muscle over who should succeed Strauss-Kahn, who had been expected to leave soon anyway to run for the French presidency.
China said on Tuesday the selection of the next IMF boss should be based on "fairness, transparency and merit". It marked the first time that the fund's third largest member has weighed in so publicly on an IMF selection debate.
South African finance minister Pravin Gordhan and a senior Brazilian government official, who asked not to be named, said the next chief should be from a developing country, pressing a case to give emerging economies a greater say in world affairs.
But Brazilian finance minister Guido Mantega said the affair should not be used to press for changes in the way the IMF head is picked, telling GloboNews TV the discussion "is too premature at this point" and Strauss-Kahn was "probably one of the best IMF chiefs that we had in the past years".
Ssangyong SUVs to hit Indian roads by FY12 end
CHENNAI: Korean automaker Ssangyong will focus on its core business of SUVs as it kicks off product development and network expansion under new parent Mahindra & Mahindra (M&M). According to a top M&M official, Ssangyong will also look at sourcing componentsfrom India, and M&M will roll out its Korean subsidiary's products in India by the end of the financial year.
Speaking to TOI, M&M president (auto & farm equipment division) Pawan Goenka said: "Our priority for Ssangyong right now is product development and expansion of the network. We will focus on SUVs because that's our core business. Ssangyong has a single car – Chairman – in its portfolio and it is not really part of our focus."
Ssangyong will alsosource components from India in a "win-win" arrangement but so far parent M&M has not put a time frame to that. "It's not top priority now but it will happen," said Goenka.
M&M is planning to launch Ssangyong products in the Indian market by the end of this financial year. The Rexton and Korando have been shortlisted for the Indian market but there are no plans to introduce the Chairman. When asked whether M&M will roll out Ssangyong productsin theUS,Goenka refused to comment.
Ssangyong, he said, is on way to overcoming the parts shortage caused by the Japan twin disasters."Although we lost a few hundred numbers due to this in April, it was lesser than March," he said. "By May, Ssangyong should be back to normal numbers."
Speaking to TOI, M&M president (auto & farm equipment division) Pawan Goenka said: "Our priority for Ssangyong right now is product development and expansion of the network. We will focus on SUVs because that's our core business. Ssangyong has a single car – Chairman – in its portfolio and it is not really part of our focus."
Ssangyong will alsosource components from India in a "win-win" arrangement but so far parent M&M has not put a time frame to that. "It's not top priority now but it will happen," said Goenka.
M&M is planning to launch Ssangyong products in the Indian market by the end of this financial year. The Rexton and Korando have been shortlisted for the Indian market but there are no plans to introduce the Chairman. When asked whether M&M will roll out Ssangyong productsin theUS,Goenka refused to comment.
Ssangyong, he said, is on way to overcoming the parts shortage caused by the Japan twin disasters."Although we lost a few hundred numbers due to this in April, it was lesser than March," he said. "By May, Ssangyong should be back to normal numbers."
Tuesday, May 17, 2011
BSNL, MTNL begin talks on synergising operations
The move gives opportunity to the PSUs to expand in the face of dipping revenue and market share.
Bharat Sanchar Nigam Ltd (BSNL) has started talks on synergising operations with Mahanagar Telephone Nigam Ltd (MTNL), which offers telecom services in Delhi and Mumbai.
The first area that has been identified is the high-margin enterprise business. The move could be a precursor to the merger of the two state-owned companies. BSNL runs fixed line and mobile services throughout the country, except in Delhi and Mumbai.
For the first time, BSNL will also open up its tower base to private players to generate a new stream of revenues. It has about 40,000 towers all across the country. “We have signed initial agreements with many private players for renting out towers. It will help us increase revenues,” BSNL Chairman and Managing Director R K Upadhyay told Business Standard. He, however, refused to share the details.
The move to rent out towers is in BSNL’s interest, as there are already several infrastructure providers who will lease out towers to the telecom players, if not BSNL, he said.
The development is significant as BSNL has towers in remote areas that could be used by other companies to expand. Most new operators are not looking to invest in towers, while most incumbents such as Bharti Airtel and Vodafone-Essar have spun off tower businesses.
To gain market share and improve revenue, BSNL has decided to focus on four areas — mobility, broadband, enterprise business and infrastructure sharing (leasing). “We have started discussions with MTNL to exploit synergies for mutual benefit. For instance, there can be rationalisation of traffic,” he said. He did not rule out merger. “The merger of BSNL and MTNL can be considered, but only at a later stage,” he said.
The department of telecommunications has been considering such a move for two-three years. It has not been able do so due to opposition from employee unions and because MTNL is a listed entity while BSNL is not.
MTNL Chairman and Managing Director Kuldeep Singh, confirmed the move. “This could become a significant part of our business.”
It is already a key area for most telecom companies such as Bharti, Reliance Communications and Vodafone-Essar. Under enterprise business, BSNL offers fleet management and customer services, among others. MTNL, on its part, plans to appoint a consultant for a brand revamp. It has already invited expressions of interest. The contract would involve development, roll out and management of the new brand, said a senior MTNL official.
Increased competition and dipping rates have hit the sector. But BSNL and MTNL have been losing revenue and market share at a faster pace than others. The two together have only 12 per cent of the mobile market. For the first time since its inception in 2000, BSNL posted a loss (of Rs 1,823 crore) in financial year 2009-10. MTNL’s loss was Rs 1,099.5 crore in the fourth quarter ended March. Its net continued to be dragged down by retirement benefits, an increase in dearness relief for pensioners and wages.
BSNL and MTNL also could not take advantage of third generation (3G) mobile services, where both were allotted spectrum one year before the private players. Both have also been hit the hardest by mobile number portability.
Bharat Sanchar Nigam Ltd (BSNL) has started talks on synergising operations with Mahanagar Telephone Nigam Ltd (MTNL), which offers telecom services in Delhi and Mumbai.
The first area that has been identified is the high-margin enterprise business. The move could be a precursor to the merger of the two state-owned companies. BSNL runs fixed line and mobile services throughout the country, except in Delhi and Mumbai.
For the first time, BSNL will also open up its tower base to private players to generate a new stream of revenues. It has about 40,000 towers all across the country. “We have signed initial agreements with many private players for renting out towers. It will help us increase revenues,” BSNL Chairman and Managing Director R K Upadhyay told Business Standard. He, however, refused to share the details.
The move to rent out towers is in BSNL’s interest, as there are already several infrastructure providers who will lease out towers to the telecom players, if not BSNL, he said.
The development is significant as BSNL has towers in remote areas that could be used by other companies to expand. Most new operators are not looking to invest in towers, while most incumbents such as Bharti Airtel and Vodafone-Essar have spun off tower businesses.
To gain market share and improve revenue, BSNL has decided to focus on four areas — mobility, broadband, enterprise business and infrastructure sharing (leasing). “We have started discussions with MTNL to exploit synergies for mutual benefit. For instance, there can be rationalisation of traffic,” he said. He did not rule out merger. “The merger of BSNL and MTNL can be considered, but only at a later stage,” he said.
The department of telecommunications has been considering such a move for two-three years. It has not been able do so due to opposition from employee unions and because MTNL is a listed entity while BSNL is not.
MTNL Chairman and Managing Director Kuldeep Singh, confirmed the move. “This could become a significant part of our business.”
It is already a key area for most telecom companies such as Bharti, Reliance Communications and Vodafone-Essar. Under enterprise business, BSNL offers fleet management and customer services, among others. MTNL, on its part, plans to appoint a consultant for a brand revamp. It has already invited expressions of interest. The contract would involve development, roll out and management of the new brand, said a senior MTNL official.
Increased competition and dipping rates have hit the sector. But BSNL and MTNL have been losing revenue and market share at a faster pace than others. The two together have only 12 per cent of the mobile market. For the first time since its inception in 2000, BSNL posted a loss (of Rs 1,823 crore) in financial year 2009-10. MTNL’s loss was Rs 1,099.5 crore in the fourth quarter ended March. Its net continued to be dragged down by retirement benefits, an increase in dearness relief for pensioners and wages.
BSNL and MTNL also could not take advantage of third generation (3G) mobile services, where both were allotted spectrum one year before the private players. Both have also been hit the hardest by mobile number portability.
SBI falls most in 2 years after Q4 earnings plunge
MUMBAI: Shares of SBI fell 7.8% on Tuesday, the highest drop in a day in two years, after the country's largest lender shocked investors with an unexpected plunge in fourth quarter profits.
Analysts forecast a further 8% decline in the stock in the next couple of weeks, but expect investors to resume purchases at lower levels as valuations turn attractive once worries about the bank's prospects recede.
SBI shares dropped to 2,413.60 on Tuesday, the lowest since July 26, 2010, as the bank stunned investors with a sharp jump in provisions for bad loans and lower-than-expected interest income.
"In addition to the higher-than-expected provisions, the steep decline in the net interest margins has come as a major negative in the results. The uptick in gross NPAs also added to the asset quality concerns," Gaurav Dua, head-research, Sharekhan . "This could result in the stock underperforming in the near term," he said SBI's net profit fell to 20.88 crore in the quarter ended March 31, 2011 compared with 1,866.60 crore in the same quarter last year.
Investors and analysts were caught unawares as the management gave no indication of such provisioning prior to the results.
"The new management appears to have endeavoured to increase the provision coverage quite sharply, which is a bit of a change in policy from the old management. Perhaps, this change in stance was not communicated too well to the market," said Brian Hunsaker, head-Asia Research of Keefe, Bruyette & Woods, Asia.
Worries about higher-than-expected provisioning for bad loans could drive away investors from shares of banks with weaker asset quality in the short-term.
Analysts forecast a further 8% decline in the stock in the next couple of weeks, but expect investors to resume purchases at lower levels as valuations turn attractive once worries about the bank's prospects recede.
SBI shares dropped to 2,413.60 on Tuesday, the lowest since July 26, 2010, as the bank stunned investors with a sharp jump in provisions for bad loans and lower-than-expected interest income.
"In addition to the higher-than-expected provisions, the steep decline in the net interest margins has come as a major negative in the results. The uptick in gross NPAs also added to the asset quality concerns," Gaurav Dua, head-research, Sharekhan . "This could result in the stock underperforming in the near term," he said SBI's net profit fell to 20.88 crore in the quarter ended March 31, 2011 compared with 1,866.60 crore in the same quarter last year.
Investors and analysts were caught unawares as the management gave no indication of such provisioning prior to the results.
"The new management appears to have endeavoured to increase the provision coverage quite sharply, which is a bit of a change in policy from the old management. Perhaps, this change in stance was not communicated too well to the market," said Brian Hunsaker, head-Asia Research of Keefe, Bruyette & Woods, Asia.
Worries about higher-than-expected provisioning for bad loans could drive away investors from shares of banks with weaker asset quality in the short-term.
Coal India 2nd most valued co after RIL
MUMBAI: As the stocks of ONGC and Coal India went in opposite directions-ONGC's southward and Coal India's northward-in Tuesday's weak market, it brought about a significant change in India Inc's market capitalization table.
In less than a year since making a blockbuster debut on the bourses on November 5 last year, Coal India, the PSU major which is the world's largest coal miner, surpassed explorations major another PSU giant ONGC to become the most valuable state-run company. The Kolkata-headquartered Coal India also became the second most-valuable company in India, after the petrochem-to-explorations major Reliance Industries (RIL). Currently, the top three valued companies are RIL with a market cap of Rs 3 lakh crore, Coal India with Rs 2.5 lakh crore and ONGC with Rs 2.37 lakh crore.
Since debuting on the bourses on the eve of Diwali Day at the fifth spot in the market cap league table, the stock of the coal mining giant has gained 62% from its IPO price of Rs 245 to its current close at Rs 396 on the BSE. The outperformance of this newcomer on the Dalal Street becomes even more spectacular when compared with RIL and ONGC, and also with other benchmark indices. Since October 21, the day Coal India IPO closed, the ONGC stock has lost 18% and RIL 15%. Similarly, sensex is down 10% and nifty on the NSE is down 11% during the period.
The rise of Coal India on the bourses has also raised expectations among Dalal Street traders that it would soon be included in the elite sensex scrips on the BSE, although analysts pointed out even if it does enter the 30-share index, the stock will have a very low weight given the high government holding.
In terms of free float market cap-the method that BSE's index committee follows to determine the weight of a stock in most of its indices-Coal India stands at 21st position when compared with the current constituents of sensex. While calculating the weight of a stock in an index, the free float methodology considers the non-promoter holding in a company and assigns a weight to its market cap based on the same.
At Tuesday's close, Coal India had a free float market cap of Rs 25,400 crore, compared to Rs 47,500 crore of ONGC. This is because the government holding in ONGC is 74.1% while the corresponding number in Coal India is 90%.
"It is important to include Coal India in the sensex," said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities, a New Delhi-based broking house. "It's become a critically important company. So if it remains out of the index, it would miss the whole purpose of an index being a representative benchmark," he added.
As per BSE's rules for inclusion in the sensex, a stock should have a three-month listing history on the bourse and should have been traded on each session during this period.
The company should also have reported revenue in the latest four quarters from its core activity, the BSE website said. Once a company qualifies within these rules, the bourse's index committee has put in several other filters, like free float market cap, sector representation to finally arrive at the final list of 30 stocks, it noted.
In less than a year since making a blockbuster debut on the bourses on November 5 last year, Coal India, the PSU major which is the world's largest coal miner, surpassed explorations major another PSU giant ONGC to become the most valuable state-run company. The Kolkata-headquartered Coal India also became the second most-valuable company in India, after the petrochem-to-explorations major Reliance Industries (RIL). Currently, the top three valued companies are RIL with a market cap of Rs 3 lakh crore, Coal India with Rs 2.5 lakh crore and ONGC with Rs 2.37 lakh crore.
Since debuting on the bourses on the eve of Diwali Day at the fifth spot in the market cap league table, the stock of the coal mining giant has gained 62% from its IPO price of Rs 245 to its current close at Rs 396 on the BSE. The outperformance of this newcomer on the Dalal Street becomes even more spectacular when compared with RIL and ONGC, and also with other benchmark indices. Since October 21, the day Coal India IPO closed, the ONGC stock has lost 18% and RIL 15%. Similarly, sensex is down 10% and nifty on the NSE is down 11% during the period.
The rise of Coal India on the bourses has also raised expectations among Dalal Street traders that it would soon be included in the elite sensex scrips on the BSE, although analysts pointed out even if it does enter the 30-share index, the stock will have a very low weight given the high government holding.
In terms of free float market cap-the method that BSE's index committee follows to determine the weight of a stock in most of its indices-Coal India stands at 21st position when compared with the current constituents of sensex. While calculating the weight of a stock in an index, the free float methodology considers the non-promoter holding in a company and assigns a weight to its market cap based on the same.
At Tuesday's close, Coal India had a free float market cap of Rs 25,400 crore, compared to Rs 47,500 crore of ONGC. This is because the government holding in ONGC is 74.1% while the corresponding number in Coal India is 90%.
"It is important to include Coal India in the sensex," said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities, a New Delhi-based broking house. "It's become a critically important company. So if it remains out of the index, it would miss the whole purpose of an index being a representative benchmark," he added.
As per BSE's rules for inclusion in the sensex, a stock should have a three-month listing history on the bourse and should have been traded on each session during this period.
The company should also have reported revenue in the latest four quarters from its core activity, the BSE website said. Once a company qualifies within these rules, the bourse's index committee has put in several other filters, like free float market cap, sector representation to finally arrive at the final list of 30 stocks, it noted.
Monday, May 16, 2011
'Low inflation essential for steady, high growth'
The Reserve Bank of India (RBI) on Monday said growth in the short term may have to be sacrificed to tame rising prices. According to the central bank, steady growth requires lower inflation.
D Subbarao“You cannot get high growth by tolerating high inflation in the long run,” RBI Governor D Subbarao said, while speaking at an event held at the Indira Gandhi Institute for Development Research. He said RBI had to manage demand and inflation expectations, which may lead to sacrificing some growth in the short term.
Inflation, which remained above the central bank’s projections during 2010-11, stood at 8.66 per cent in April. The steep increase in fuel prices over the weekend is expected to add to inflationary pressures, according to economists.
Subbarao said April inflation of 8.66 per cent was high and RBI needed to manage the trade-off between growth and inflation to hasten growth. “The objective of the 12th Plan is faster, more inclusive and sustainable growth. From RBI’s perspective, the primary challenge is to manage faster growth with low inflation. We need low inflation for steady and high growth,” Subbarao said. RBI has pegged gross domestic product growth at 8 per cent for the current financial year — lower than the government’s projection of nine per cent. “Perhaps the threshold for inflation is five per cent,” Subbarao said.
Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, while speaking at the same event, said any reduction in inflation would happen gradually. “I think inflation remains an area of concern. Inflation results which we are seeing now, are probably the outcome of measures we had taken three-four months back. I think the effect of what has been recently done would be felt two-three months down the road. Overall, I expect inflation to soften in the next few months. It will, however, remain above 6 per cent for some more time,” Ahluwalia said. He added the Planning Commission’s comfort zone on inflation was somewhere between five-six per cent. “It is agreed inflation would remain above 6 per cent for some more time. However, there is no dispute in anybody’s mind that inflation above six per cent is in the danger zone,” Ahluwalia said.
Apart from demand-side pressures, RBI saw rising oil and food prices as key drivers of inflation.
D Subbarao“You cannot get high growth by tolerating high inflation in the long run,” RBI Governor D Subbarao said, while speaking at an event held at the Indira Gandhi Institute for Development Research. He said RBI had to manage demand and inflation expectations, which may lead to sacrificing some growth in the short term.
Inflation, which remained above the central bank’s projections during 2010-11, stood at 8.66 per cent in April. The steep increase in fuel prices over the weekend is expected to add to inflationary pressures, according to economists.
Subbarao said April inflation of 8.66 per cent was high and RBI needed to manage the trade-off between growth and inflation to hasten growth. “The objective of the 12th Plan is faster, more inclusive and sustainable growth. From RBI’s perspective, the primary challenge is to manage faster growth with low inflation. We need low inflation for steady and high growth,” Subbarao said. RBI has pegged gross domestic product growth at 8 per cent for the current financial year — lower than the government’s projection of nine per cent. “Perhaps the threshold for inflation is five per cent,” Subbarao said.
Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, while speaking at the same event, said any reduction in inflation would happen gradually. “I think inflation remains an area of concern. Inflation results which we are seeing now, are probably the outcome of measures we had taken three-four months back. I think the effect of what has been recently done would be felt two-three months down the road. Overall, I expect inflation to soften in the next few months. It will, however, remain above 6 per cent for some more time,” Ahluwalia said. He added the Planning Commission’s comfort zone on inflation was somewhere between five-six per cent. “It is agreed inflation would remain above 6 per cent for some more time. However, there is no dispute in anybody’s mind that inflation above six per cent is in the danger zone,” Ahluwalia said.
Apart from demand-side pressures, RBI saw rising oil and food prices as key drivers of inflation.
Markets open flat, ONGC slips over 2%
Markets opened on a subdued note due to lack of any strong trigger and weak global cues. The S&P CNX Nifty was up 2 points, at 5,501 and the Sensex was up 23 points, at 18,365.
Foreign Institutional Investors have turned Jittery as they have been net sellers of $1.6 billion (Rs 7220 crore) since March 25 according to the Bombay Stock Exchnage due to high inflation and hawkish stance of the central Bank. Technical analysts expect further downside for the markets as the Nifty has formed a bear flag pattern on technical charts resembling an inverted flag on a pole, the decline has strong volume and consistent downward price movement.
Edelweiss in the morning note said, “The bear flag continuation pattern is still in play as we look for an eventual break down of last week’s range trade. The momentum oscillators have again rolled bearish.” Edelweiss expects markets to take support at 5370-5350 levels.
Across Asia, markets were trading mostly lower amid signs of a slowdown in the United States which dragged the global stocks and oil prices lower.
Japan's benchmark Nikkei average was down 0.4% over concerns of compensation pay out at the nuclear power plant and losses in auto shares. Hong Kong's Hang Seng fell 0.4% led by losses in resource shares. China's Shanghai Composite index slipped 0.2%.
Among individual stocks ONGC fell 4% on concerns that upstream oil companies may have to bear the subsidy burden of Rs 30,000 crore according to television reports as government increased upstream subsidy sharing to to 38.5% of total burden for FY11 which may affect the profitability and plans of Follow on public offer. Also State Bank of India was on investors’ radar ahead of quarterly results, according to Reuters poll profit is expected to rise 63% y-o-y.
Foreign Institutional Investors have turned Jittery as they have been net sellers of $1.6 billion (Rs 7220 crore) since March 25 according to the Bombay Stock Exchnage due to high inflation and hawkish stance of the central Bank. Technical analysts expect further downside for the markets as the Nifty has formed a bear flag pattern on technical charts resembling an inverted flag on a pole, the decline has strong volume and consistent downward price movement.
Edelweiss in the morning note said, “The bear flag continuation pattern is still in play as we look for an eventual break down of last week’s range trade. The momentum oscillators have again rolled bearish.” Edelweiss expects markets to take support at 5370-5350 levels.
Across Asia, markets were trading mostly lower amid signs of a slowdown in the United States which dragged the global stocks and oil prices lower.
Japan's benchmark Nikkei average was down 0.4% over concerns of compensation pay out at the nuclear power plant and losses in auto shares. Hong Kong's Hang Seng fell 0.4% led by losses in resource shares. China's Shanghai Composite index slipped 0.2%.
Among individual stocks ONGC fell 4% on concerns that upstream oil companies may have to bear the subsidy burden of Rs 30,000 crore according to television reports as government increased upstream subsidy sharing to to 38.5% of total burden for FY11 which may affect the profitability and plans of Follow on public offer. Also State Bank of India was on investors’ radar ahead of quarterly results, according to Reuters poll profit is expected to rise 63% y-o-y.
Foreign investment in MFs likely to face cap
MUMBAI: India's policy-makers are considering putting a cap or ceiling of between $5 and $10 billion on investment by foreign investors in Indian mutual funds to possibly limit the impact of any surge in inflows once this route is opened up soon.
The government had announced in this year's budget that it would allow overseas individuals to invest in equity schemes of Indian mutual funds as part of a move to diversify the class of foreign investors in the local equities market. Securities market regulator, Sebi, the Reserve Bank of India and the finance ministry have been in talks to operationalise a scheme for this and the central bank has suggested that as a prudential measure, a ceiling on investment by these foreign investors should be fixed to start with, two senior officials ent said.
The way the scheme will operate is that a foreign investor will have to open a dematerialisation or paperless trading account and a bank account here for which the Know Your Customer norms will be done by a local bank or intermediary registered with regulators here. Once this is done, foreign investors can buy into over 400 equity schemes.
Foreign funds and non-resident Indians who are registered with Sebi are allowed to invest in equity mutual funds but there has hardly been any investment except in select exchange traded funds.
In the Indian equities market, there are no fetters on foreign funds in terms of investment except a limit of 10% on a single foreign investor buying into a company's capital. For investments in Indian corporate and government debt too, there are restrictions. "We need a framework for both capital inflows and outflows and we thought that it would not only be prudent but also provide clarity upfront if we say that there would be a ceiling on investment," a senior official said. This official declined to be identified.
What could be of concern to the central bank is a possible surge in volatile capital inflows later which could put pressure on currency and inflation management. When foreign capital flows are robust, the Reserve Bank will have to mop up these flows which in turn results in boosting liquidity in the local markets. To check this excess liquidity, the RBI sells securities or bonds to banks and institutions to drain it out - a process known as sterilisation. This however comes at a cost to the government - which has to service the interest cost on these bonds.
Right now, such worries are overblown because excess inflows if any are being used to finance India's current account deficit - the excess of goods and services imports over exports. In FY11, foreign portfolio investors bought stocks and bonds of over $31 billion. In the year to date, foreign funds have been net sellers at $490 million. Sebi has worked out a scheme for foreign investors to buy into local mutual funds which is being vetted by the government and the Reserve Bank of India. One of the challenges in getting the scheme going is in ensuring KYC or due diligence of the foreign investor. Only some of the depository participants such as banks which have a wide global network may be in a position to carry this out. Indian institutions may either to forge tie-ups with foreign partners or open offices abroad if they want to woo greater foreign portfolio investment. If the scheme takes off as policy makers are hoping it would - it will boost India's mutual fund industry which manages assets of over Rs 7,00,000 crore and is now weighed down by the problem of lack of interest on the part of distributors to sell mutual funds. They have been loath to push mutual fund products after the regulator banned fund houses from charging investors an entry fees or load.
The government had announced in this year's budget that it would allow overseas individuals to invest in equity schemes of Indian mutual funds as part of a move to diversify the class of foreign investors in the local equities market. Securities market regulator, Sebi, the Reserve Bank of India and the finance ministry have been in talks to operationalise a scheme for this and the central bank has suggested that as a prudential measure, a ceiling on investment by these foreign investors should be fixed to start with, two senior officials ent said.
The way the scheme will operate is that a foreign investor will have to open a dematerialisation or paperless trading account and a bank account here for which the Know Your Customer norms will be done by a local bank or intermediary registered with regulators here. Once this is done, foreign investors can buy into over 400 equity schemes.
Foreign funds and non-resident Indians who are registered with Sebi are allowed to invest in equity mutual funds but there has hardly been any investment except in select exchange traded funds.
In the Indian equities market, there are no fetters on foreign funds in terms of investment except a limit of 10% on a single foreign investor buying into a company's capital. For investments in Indian corporate and government debt too, there are restrictions. "We need a framework for both capital inflows and outflows and we thought that it would not only be prudent but also provide clarity upfront if we say that there would be a ceiling on investment," a senior official said. This official declined to be identified.
What could be of concern to the central bank is a possible surge in volatile capital inflows later which could put pressure on currency and inflation management. When foreign capital flows are robust, the Reserve Bank will have to mop up these flows which in turn results in boosting liquidity in the local markets. To check this excess liquidity, the RBI sells securities or bonds to banks and institutions to drain it out - a process known as sterilisation. This however comes at a cost to the government - which has to service the interest cost on these bonds.
Right now, such worries are overblown because excess inflows if any are being used to finance India's current account deficit - the excess of goods and services imports over exports. In FY11, foreign portfolio investors bought stocks and bonds of over $31 billion. In the year to date, foreign funds have been net sellers at $490 million. Sebi has worked out a scheme for foreign investors to buy into local mutual funds which is being vetted by the government and the Reserve Bank of India. One of the challenges in getting the scheme going is in ensuring KYC or due diligence of the foreign investor. Only some of the depository participants such as banks which have a wide global network may be in a position to carry this out. Indian institutions may either to forge tie-ups with foreign partners or open offices abroad if they want to woo greater foreign portfolio investment. If the scheme takes off as policy makers are hoping it would - it will boost India's mutual fund industry which manages assets of over Rs 7,00,000 crore and is now weighed down by the problem of lack of interest on the part of distributors to sell mutual funds. They have been loath to push mutual fund products after the regulator banned fund houses from charging investors an entry fees or load.
IBM, HP opt out of 2,000-crore UIDAI bid
NEW DELHI: Two of the world's largest technology companies - IBM and HP - on Monday opted out from bidding for the 2,000-crore outsourcing contract to manage the world's biggest citizen identity database, people familiar with the development said.
The Unique Identity Development Authority of India, or UIDAI, headed by Infosys founder Nandan Nilekani , had asked vendors to submit their proposals for the contract by Monday evening. After IBM and HP dropped out from the race, the remaining five - Accenture , Wipro, TCS , HCL Infosystems and Mahindra Satyam - will go to the next stage and begin their negotiations with the UID officials.
"They (IBM and HP) are not interested," confirmed an official familiar with the bidding.
In one of the biggest outsourcing contracts to be awarded this year by any Indian government department, the selected vendor will manage all IT and the national repository which will contain data of all Indian citizens.
Executives at vendors who decided not to bid said it was a decision by Global HQs not to participate in bidding.
"As far as I know, we have not submitted any bids, the conditions did not match our processes," said another person who requested anonymity because he is not authorised to speak with media.
The tech majors had earlier complained to Unique ID Authority of being biased towards products of certain vendors (EMC Corp and Cisco). The authority postponed the bidding last month and made changes to the tender specifications after ET reported about a fiery meeting in the capital with the bidders.
The final five vendors submitted bids on Monday at UIDAI headquarters at Jeevan Bharti Building at Connaught Place in huge cartons. The timely selection of the IT vendor is critical to the success and implementation of the UIDAI project, which aims at giving 600 million Unique ID numbers by 2014.
"We decided to quit the bidding process on the request of our global headquarters. Things had become pretty hostile between us and the authority over the weeks," said an official at one the US-based tech majors which opted out. "Things had become pretty bad for us after we complained," said another top level official declining further comment.
Spokespersons of both IBM and HP declined to offer reasons why the companies opted out from participating in one of the most prestigious and large projects in India, even after submitting expressions of interest. Both companies got selected and participated in all pre-bids as well.
Another executive said his company decided to opt out because the chances to win the project were not as bright.
"It costs us over a million dollars to put in such a large bid as teams fly down from across the globe over many months. It's best we concentrate on projects where chances of winning are higher," he added.
UIDAI officials say it's up to the companies to bid. "Some who opted out have earlier participated as equipment vendors. We will take about three months to decide on the winner from the bidders," said a UIDAI spokesperson. The selected vendor will manage all IT infrastructure for the project. Only large firms with at least 4,000 people and sales of 6,000 crore in the last three years were allowed to bid.
The Unique Identity Development Authority of India, or UIDAI, headed by Infosys founder Nandan Nilekani , had asked vendors to submit their proposals for the contract by Monday evening. After IBM and HP dropped out from the race, the remaining five - Accenture , Wipro, TCS , HCL Infosystems and Mahindra Satyam - will go to the next stage and begin their negotiations with the UID officials.
"They (IBM and HP) are not interested," confirmed an official familiar with the bidding.
In one of the biggest outsourcing contracts to be awarded this year by any Indian government department, the selected vendor will manage all IT and the national repository which will contain data of all Indian citizens.
Executives at vendors who decided not to bid said it was a decision by Global HQs not to participate in bidding.
"As far as I know, we have not submitted any bids, the conditions did not match our processes," said another person who requested anonymity because he is not authorised to speak with media.
The tech majors had earlier complained to Unique ID Authority of being biased towards products of certain vendors (EMC Corp and Cisco). The authority postponed the bidding last month and made changes to the tender specifications after ET reported about a fiery meeting in the capital with the bidders.
The final five vendors submitted bids on Monday at UIDAI headquarters at Jeevan Bharti Building at Connaught Place in huge cartons. The timely selection of the IT vendor is critical to the success and implementation of the UIDAI project, which aims at giving 600 million Unique ID numbers by 2014.
"We decided to quit the bidding process on the request of our global headquarters. Things had become pretty hostile between us and the authority over the weeks," said an official at one the US-based tech majors which opted out. "Things had become pretty bad for us after we complained," said another top level official declining further comment.
Spokespersons of both IBM and HP declined to offer reasons why the companies opted out from participating in one of the most prestigious and large projects in India, even after submitting expressions of interest. Both companies got selected and participated in all pre-bids as well.
Another executive said his company decided to opt out because the chances to win the project were not as bright.
"It costs us over a million dollars to put in such a large bid as teams fly down from across the globe over many months. It's best we concentrate on projects where chances of winning are higher," he added.
UIDAI officials say it's up to the companies to bid. "Some who opted out have earlier participated as equipment vendors. We will take about three months to decide on the winner from the bidders," said a UIDAI spokesperson. The selected vendor will manage all IT infrastructure for the project. Only large firms with at least 4,000 people and sales of 6,000 crore in the last three years were allowed to bid.
Free trade pact with EU likely to include auto
CHENNAI: India's proposed free trade agreement (FTA) with the European Union could include tariff reduction on import of vehicles as well as automotive components. If it does, it will be a first since India's FTAs with other auto hubs like Japan, Korea and Thailand have so far left out completely-built vehicles from the areas covered by the FTA. The possibility of fully-built vehicles being included in the FTA with the EU – home to auto majors like Volkswagen, BMW, Mercedes Benz, Fiat and Renault – is causing considerable heartburn in the auto industry.
The industry apex body SIAM (Society of Indian Automobile Manufacturers) had protested against the inclusion of fully-built vehicles under the EU FTA earlier this year. The commerce ministry had, back then, asked for their recommendation on the subject. SIAM had said it's against any exception to the rule that has so far applied to other FTAs including the Asean, Korea and Japan. All of them lead to some tariff reduction on components but did not touch fullybuilt up vehicles. SIAM wanted status quo to be maintained in the case of the EU FTA as well.
Since then, though, the industry has not been kept in the loop about the details of the negotiations or the areas that are likely to be covered. The ministry and SIAM had a public face-off before that – the government felt the auto industry enjoyed undue tariff protection unlike other sectors while SIAM felt the EU FTA would seriously impact both employment and investment in the sector.
The EU FTA has now entered the final phase of negotiations and the draft will likely be announced shortly. Once both the Indian commerce minister and EU trade commissioner announce their intent to sign, the FTA will be formally implemented next year.
"Apart from offering the EU undue tariff advantage in automobiles over Japan, Asean and Korea, it will also mean cheap import of big cars which will run on subsidised diesel at a time when big cars in India are being taxed higher and there is also talk of a diesel tax on big SUVs and luxury vehicles," said a Delhi-based auto CEO.
Currently import of fully-built up cars attracts 110% duty though the actual import duty is 60%. The rest of the taxes are also applicable on locally assembled vehicles. European car majors such as Volkswagen, Mercedes Benz, BMW, Renault and Fiat have made substantial investments in India. VW, for instance, has pumped in Rs 3,800 crore in its new plant in Chakan, Maharashtra; Mercedes Benz and Daimler India are together pumping in around Rs 5,000 crore into the Indian market in creating a car assembly line and a truck manufacturing plant.
The industry apex body SIAM (Society of Indian Automobile Manufacturers) had protested against the inclusion of fully-built vehicles under the EU FTA earlier this year. The commerce ministry had, back then, asked for their recommendation on the subject. SIAM had said it's against any exception to the rule that has so far applied to other FTAs including the Asean, Korea and Japan. All of them lead to some tariff reduction on components but did not touch fullybuilt up vehicles. SIAM wanted status quo to be maintained in the case of the EU FTA as well.
Since then, though, the industry has not been kept in the loop about the details of the negotiations or the areas that are likely to be covered. The ministry and SIAM had a public face-off before that – the government felt the auto industry enjoyed undue tariff protection unlike other sectors while SIAM felt the EU FTA would seriously impact both employment and investment in the sector.
The EU FTA has now entered the final phase of negotiations and the draft will likely be announced shortly. Once both the Indian commerce minister and EU trade commissioner announce their intent to sign, the FTA will be formally implemented next year.
"Apart from offering the EU undue tariff advantage in automobiles over Japan, Asean and Korea, it will also mean cheap import of big cars which will run on subsidised diesel at a time when big cars in India are being taxed higher and there is also talk of a diesel tax on big SUVs and luxury vehicles," said a Delhi-based auto CEO.
Currently import of fully-built up cars attracts 110% duty though the actual import duty is 60%. The rest of the taxes are also applicable on locally assembled vehicles. European car majors such as Volkswagen, Mercedes Benz, BMW, Renault and Fiat have made substantial investments in India. VW, for instance, has pumped in Rs 3,800 crore in its new plant in Chakan, Maharashtra; Mercedes Benz and Daimler India are together pumping in around Rs 5,000 crore into the Indian market in creating a car assembly line and a truck manufacturing plant.
Sunday, May 15, 2011
Markets likely to be range-bound this week: Experts
The stock market is likely to be range-bound this week as investors weigh positive cues like declining food inflation and better-than-expected industrial growth against the recent hike in key short-term interest rates, say experts. Market players said the short-term momentum is clearly negative for
the market, as high interest rates are a significant damper for the overall sentiment.
"We have to wait and watch for commodities to decline and stabilise, IIP to rise and stabilise and inflation or interest rates pressure to ease and then markets can become more positive in the next 2-3 months," Mape Securities Senior Director (Research) Kislay Kanth said.
The market mood is likely to be vitiated by the government's decision to hike petrol prices by Rs 5 in New Delhi. Analysts apprehended that if petrol prices went up by Rs 1-2 per litre, the market would discount it, but if they went up by more than Rs 3-4 a litre, the market will go into the negative zone.
It was a lacklustre week for the market despite positive domestic economic indicators. In the week gone by, the BSE benchmark Sensex went up marginally by 0.06% to settle at 18,531.28 in the previous trading session.
"Going forward, the market will take cues from any sort of positive overtures from the Centre on the policy front. The market will welcome any further moderation in crude oil and other global commodities. Watch out for the April inflation data on Monday," IIFL Head of Research (India Private Clients) Amar Ambani said.
Analysts said the favourable election outcome would give the Congress-led coalition more leverage to push through long-pending reforms in the financial sector.
"The sentiment got a boost, as with the ouster of the scam-tainted DMK in Tamil Nadu, UPA-II could just be able to pursue long-pending reforms and will be able to deal with the 2G scam culprits much more effectively," Ambani said.
Food inflation dropped to 7.7% for the week ended April 30, the lowest level in 18 months. India's exports grew by an annualised 34.4% to USD 23.9 billion in April.
Factory output in March, as measured in terms of the Index of Industrial Production (IIP), slowed to 7.3%, compared to 15.5% expansion in the same month a year ago.
Experts said the IIP growth rate of 7.3% was higher than expected and will likely generate a positive response. The growth rate of 7.8% for FY'11 is less than FY'10, but is still good, given that IIP rates in the last 4-5 months were very volatile, they added.
the market, as high interest rates are a significant damper for the overall sentiment.
"We have to wait and watch for commodities to decline and stabilise, IIP to rise and stabilise and inflation or interest rates pressure to ease and then markets can become more positive in the next 2-3 months," Mape Securities Senior Director (Research) Kislay Kanth said.
The market mood is likely to be vitiated by the government's decision to hike petrol prices by Rs 5 in New Delhi. Analysts apprehended that if petrol prices went up by Rs 1-2 per litre, the market would discount it, but if they went up by more than Rs 3-4 a litre, the market will go into the negative zone.
It was a lacklustre week for the market despite positive domestic economic indicators. In the week gone by, the BSE benchmark Sensex went up marginally by 0.06% to settle at 18,531.28 in the previous trading session.
"Going forward, the market will take cues from any sort of positive overtures from the Centre on the policy front. The market will welcome any further moderation in crude oil and other global commodities. Watch out for the April inflation data on Monday," IIFL Head of Research (India Private Clients) Amar Ambani said.
Analysts said the favourable election outcome would give the Congress-led coalition more leverage to push through long-pending reforms in the financial sector.
"The sentiment got a boost, as with the ouster of the scam-tainted DMK in Tamil Nadu, UPA-II could just be able to pursue long-pending reforms and will be able to deal with the 2G scam culprits much more effectively," Ambani said.
Food inflation dropped to 7.7% for the week ended April 30, the lowest level in 18 months. India's exports grew by an annualised 34.4% to USD 23.9 billion in April.
Factory output in March, as measured in terms of the Index of Industrial Production (IIP), slowed to 7.3%, compared to 15.5% expansion in the same month a year ago.
Experts said the IIP growth rate of 7.3% was higher than expected and will likely generate a positive response. The growth rate of 7.8% for FY'11 is less than FY'10, but is still good, given that IIP rates in the last 4-5 months were very volatile, they added.
Fresh blood at heart of Wipro’s revamp
Wipro had become too bloated and bureaucratic to compete effectively, admits Azim Premji, the chairman and majority owner of India’s third-largest IT outsourcing company.
So, in far-reaching changes to Wipro’s culture, thousands of new graduates are being hired to help with the reinvigoration process.
“I think where it went wrong was that we over-bureaucratised the organisation,” Mr Premji tells the Financial Times during a visit to London. “We created too many layers. I think we have enough people in middle management and supervisory levels. We don’t want to be top-heavy.
“What we are doing is recruiting 70 per cent of our people from campus now. Whereas last year, we recruited just 45 per cent from campus,” he says.
But other changes to the structure at Wipro are a touchy subject with Mr Premji, who has led the group for the last 45 years.
He wants to make it clear that the sudden departure in January of Girish Paranjpe and Suresh Vaswani, who were joint chief executives of the company, was in no way an “ousting”.
Nor does he believe that it was a mistake for Wipro to have tried out an unusual structure of two chief executives. “It was a decision we made three years ago when the world was facing terrible impending risk of recession. We thought we required the power of two, irrespective of the weaknesses of the power of two.”
The appointment of T.K. Kurien as the company’s new, sole chief executive had been planned for some time, Mr Premji says, but he admits the changeover was brought forward by Wipro’s disappointing sales performance last year.
“The organisation was losing momentum, so we reacted. We thought that a change from a joint CEO structure to a single CEO structure was critical.”
Wipro saw just 6 per cent revenue growth in 2010 compared with 40 per cent growth for rival Cognizant and 24.3 per cent for Tata Consultancy Services, another competitor.
Mr Kurien, a long-term Wipro employee, who was previously head of the company’s eco-energy unit, represents a younger, more driven management style.
The 52-year-old is known within Wipro for being energetic and straight-talking and for having a ruthless attention to detail.
At one of his first staff meetings he gave prizes to the employees asking him the toughest questions.
Mr Premji, who owns 74 per cent of Wipro, says Mr Kurien offers “extremely strong execution capability blended with a strong strategic focus. And he is terrific with customers”.
Critics of the Bangalore-based company say it has been unable to respond quickly enough to changing demands in the wake of the global financial crisis.
Sudin Apte, principal analyst at Offshore Insight, says: “There is a perception among clients that Wipro isn’t able to deliver what they need, which is a more integrated business and technology solution rather than just providing a software and some back-office . . . they want added-value services.”
Mr Premji concedes some ground to the critics, saying: “Where we have really fallen behind is our ability to create business with customers. We have always been in the past too much in a reactive model. We have not created business like an Accenture or IBM does. Customers want to be coached and to have us discuss with them what more we can do for their business.”
Wipro is a family business and 67-year-old Mr Premji was forced to take over the running of the company in 1966, interrupting his studies in electrical engineering at Stanford university, following the sudden death of his father.
He has never been hesitant to make changes at the group, having transformed the business from a maker of hydrogenated vegetable oils to one of the leaders in the Indian IT industry.
Mr Premji says he expects the world economy to remain mixed over the next few years.
However, he says that protectionist sentiment in the US, which has dogged the Indian outsourcing companies’ efforts to expand in that market, was likely to soften as the US economy went into recovery.
Mr Premji has recently been withdrawing – just a touch – from the business. His role as chairman is mainly strategic these days and his work for the educational charity he has founded in India is becoming more important.
In December, Mr Premji, whose personal fortune is estimated at $16.8bn, donated Wipro shares worth $2bn to his own foundation to fund rural education – one of the largest charitable donations in Indian history. He was nominated as one of the world’s 100 most influential people by Time magazine, including a citation from Bill Gates for his charity work.
He continues to keep a close eye, however, on Mr Kurien’s progress. The new chief has tough targets to reach. “The most important thing is restoring employee morale, customer satisfaction and getting the sales engine working again. He has to do it,” Mr Premji says. “The stakes are so large, you can’t carry dead wood.”
So, in far-reaching changes to Wipro’s culture, thousands of new graduates are being hired to help with the reinvigoration process.
“I think where it went wrong was that we over-bureaucratised the organisation,” Mr Premji tells the Financial Times during a visit to London. “We created too many layers. I think we have enough people in middle management and supervisory levels. We don’t want to be top-heavy.
“What we are doing is recruiting 70 per cent of our people from campus now. Whereas last year, we recruited just 45 per cent from campus,” he says.
But other changes to the structure at Wipro are a touchy subject with Mr Premji, who has led the group for the last 45 years.
He wants to make it clear that the sudden departure in January of Girish Paranjpe and Suresh Vaswani, who were joint chief executives of the company, was in no way an “ousting”.
Nor does he believe that it was a mistake for Wipro to have tried out an unusual structure of two chief executives. “It was a decision we made three years ago when the world was facing terrible impending risk of recession. We thought we required the power of two, irrespective of the weaknesses of the power of two.”
The appointment of T.K. Kurien as the company’s new, sole chief executive had been planned for some time, Mr Premji says, but he admits the changeover was brought forward by Wipro’s disappointing sales performance last year.
“The organisation was losing momentum, so we reacted. We thought that a change from a joint CEO structure to a single CEO structure was critical.”
Wipro saw just 6 per cent revenue growth in 2010 compared with 40 per cent growth for rival Cognizant and 24.3 per cent for Tata Consultancy Services, another competitor.
Mr Kurien, a long-term Wipro employee, who was previously head of the company’s eco-energy unit, represents a younger, more driven management style.
The 52-year-old is known within Wipro for being energetic and straight-talking and for having a ruthless attention to detail.
At one of his first staff meetings he gave prizes to the employees asking him the toughest questions.
Mr Premji, who owns 74 per cent of Wipro, says Mr Kurien offers “extremely strong execution capability blended with a strong strategic focus. And he is terrific with customers”.
Critics of the Bangalore-based company say it has been unable to respond quickly enough to changing demands in the wake of the global financial crisis.
Sudin Apte, principal analyst at Offshore Insight, says: “There is a perception among clients that Wipro isn’t able to deliver what they need, which is a more integrated business and technology solution rather than just providing a software and some back-office . . . they want added-value services.”
Mr Premji concedes some ground to the critics, saying: “Where we have really fallen behind is our ability to create business with customers. We have always been in the past too much in a reactive model. We have not created business like an Accenture or IBM does. Customers want to be coached and to have us discuss with them what more we can do for their business.”
Wipro is a family business and 67-year-old Mr Premji was forced to take over the running of the company in 1966, interrupting his studies in electrical engineering at Stanford university, following the sudden death of his father.
He has never been hesitant to make changes at the group, having transformed the business from a maker of hydrogenated vegetable oils to one of the leaders in the Indian IT industry.
Mr Premji says he expects the world economy to remain mixed over the next few years.
However, he says that protectionist sentiment in the US, which has dogged the Indian outsourcing companies’ efforts to expand in that market, was likely to soften as the US economy went into recovery.
Mr Premji has recently been withdrawing – just a touch – from the business. His role as chairman is mainly strategic these days and his work for the educational charity he has founded in India is becoming more important.
In December, Mr Premji, whose personal fortune is estimated at $16.8bn, donated Wipro shares worth $2bn to his own foundation to fund rural education – one of the largest charitable donations in Indian history. He was nominated as one of the world’s 100 most influential people by Time magazine, including a citation from Bill Gates for his charity work.
He continues to keep a close eye, however, on Mr Kurien’s progress. The new chief has tough targets to reach. “The most important thing is restoring employee morale, customer satisfaction and getting the sales engine working again. He has to do it,” Mr Premji says. “The stakes are so large, you can’t carry dead wood.”
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