Infosys Technologies Ltd., India’s second-largest software exporter, promoted S.D. Shibulal to the post of chief executive officer, picking the company veteran to boost earnings amid rising competition for outsourcing deals.
The board also named current Chief Executive Officer S. Gopalakrishnan co-chairman, and former ICICI Bank Ltd. head K.V. Kamath as chairman, the Bangalore-based company said in an April 30 statement. Current chairman and billionaire founder N.R. Narayana Murthy will become chairman emeritus.
As CEO, Shibulal, 56, has the task of winning more outsourcing deals as bigger rival Tata Consultancy Services Ltd. widens its lead. The management changes come after Infosys’s earnings missed estimates for a third time in four quarters and the company, dealing with its worst annual rate of employee turnover in at least 13 years, forecast the lowest profit margin since at least 2003.
“The new management will need to be more aggressive in terms of pursuing new clients,” said Sampath Reddy, who manages 280 billion rupees ($6.3 billion) as chief investment officer at Bajaj Allianz Life Insurance Co. “The second thing is, it needs to look at whether acquisitions need to be done.”
The appointments are effective Aug. 21, the company said.
Infosys shares fell 0.8 percent to 2,906.25 rupees in Mumbai April 29, taking the year-to-date slump to 16 percent. India’s benchmark Sensex Index has lost 6.7 percent this year.
‘Fallen Angel’
“For many years, Infosys was a huge overperformer in the Indian market,” said Walter Rossini, who manages a 250 million- euro ($370 million) India equity fund at Aletti Gestielle SGR SpA in Milan. “Now the situation is different. TCS is favored and Infosys is the fallen angel.”
Since Gopalakrishnan became CEO on June 22, 2007, Infosys shares gained 49 percent, according Bloomberg data. Tata Consultancy, also known as TCS, more than doubled in the same period, while the benchmark Sensex index gained 32 percent.
Tata Consultancy’s lead in sales widened to 98 billion rupees in the year ended March from 59 billion rupees in 2008.
“We’re very happy,” Murthy said about rising competition and overseas rivals expanding into India. “That’s a validation of our model. That’s a validation of what we said in the late 80s and the early 90s. It’s good for the country.”
On April 30, the directors also approved changing the name of the company to Infosys Ltd. Shareholders’ consent will be sought at the annual general meeting on June 11.
The management reorganization has “lingered on for quite some time and has been quite distracting for senior employees,” Nimish Joshi, an analyst at CLSA Ltd., wrote in a note to clients on April 17.
Pai’s Resignation
T.V. Mohandas Pai announced his resignation as director and head of human resources development after 17 years in the company on April 15. He was expected to take over the role of chief operating officer, the Economic Times reported on April 8. K. Dinesh, a co-founder, said last month he will retire.
Shibulal, who helped found Infosys in 1981, is currently the chief operating officer. He took a five-year sabbatical, working with Sun Microsystems between 1991 and 1996. He returned to Infosys and established its Internet consultancy practice and later was the head of worldwide sales.
Shibulal has master’s degrees in physics and computer science from the University of Kerala and Boston University.
“Every organization needs to transform itself periodically to remain relevant,” he said at a press conference on April 30. “With the advent of cloud, perhaps the most disruptive of changes in recent times, we are looking at global delivery model on cloud as a key driver for Infosys 3.0.”
Murthy, 64, convinced six fellow software engineers to help him set up Infosys in 1981. They started with $250, borrowed mostly from their wives, and became the first Indian company to list on the Nasdaq stock market.
“Shibu has been a remarkable COO these past few years,” said Jeffrey S. Lehman, chairman of the nominations committee. “Shibu understands this company as well as anybody alive, and he has in many ways been preparing for this role for three decades.”
Sunday, May 1, 2011
Infosys shakes-up top management team
Infosys Technologies, India’s second-largest technology outsourcing company by revenue, has unveiled a major shake up of its top management team, just two weeks after the company released its third set of disappointing quarterly results in succession.
The Bangalore-based company named veteran banker KV Kamath as its new chairman, and promoted S.D. Shibulal, a co-founder of the group and its chief operating officer, to chief executive. S Gopalakrishnan, the current chief executive, will become executive co-chairman.
This is the first time since Infosys was founded three decades ago that an outsider has been picked to lead the group, which has traditionally chosen top executives from within its own ranks.
The appointment of Mr Kamath, former chief executive of ICICI, India’s largest private sector bank, was welcomed by local opinion makers, however, some analysts warned that the move would raise concerns among investors as the shake-up was supposed to bring new faces into the business.
“Kamath is a positive choice in terms of governance and wisdom but it will not radicalise the business strategy,” said Pradeet Udhas, a founding partner at KPMG India. “The day-to-day business will remain in the hands of Shibulal and Gopalakrishnan.”
The changes will be effective from August when NR Narayana Murthy, the leading founder of Infosys and current chairman, retires.
“As we look ahead, we will ensure that this leadership transition is smooth as all other transitions have been in the past,” Mr Shibulal said. “We are also making other organisational changes to strengthen our market position and ability to serve our clients better.”
Infosys, which is known for being the bellwether of India’s flagship $60bn outsourcing industry, has been steadily losing market share to both larger rival Tata Consultancy Services and Cognizant, a rising star in the sector.
Shares in Infosys plunged nearly 10 per cent last month on the day it reported disappointing annual results a downbeat outlook for the next year. The group expects its revenues to grow by between 15-17 per cent, much lower than the 20 per cent analysts had been expecting.
Infosys, whose clients include Goldman Sachs and BP, was hit by the global economic crisis more than its peers as it struggled to innovate and find new markets for expansion.
The biggest concern for the group is the slow and uncertain recovery in the US and European economies, according to Ashok Vemuri, the group’s New York-based global head of banking and capital markets services.
“Europe and North America are concerning,” Mr Vemuri told the Financial Times. “As long as there is uncertainty in the US ahead of the [2012 presidential] elections and the European economy there will always be a cloud over our outlook.”
The Bangalore-based company named veteran banker KV Kamath as its new chairman, and promoted S.D. Shibulal, a co-founder of the group and its chief operating officer, to chief executive. S Gopalakrishnan, the current chief executive, will become executive co-chairman.
This is the first time since Infosys was founded three decades ago that an outsider has been picked to lead the group, which has traditionally chosen top executives from within its own ranks.
The appointment of Mr Kamath, former chief executive of ICICI, India’s largest private sector bank, was welcomed by local opinion makers, however, some analysts warned that the move would raise concerns among investors as the shake-up was supposed to bring new faces into the business.
“Kamath is a positive choice in terms of governance and wisdom but it will not radicalise the business strategy,” said Pradeet Udhas, a founding partner at KPMG India. “The day-to-day business will remain in the hands of Shibulal and Gopalakrishnan.”
The changes will be effective from August when NR Narayana Murthy, the leading founder of Infosys and current chairman, retires.
“As we look ahead, we will ensure that this leadership transition is smooth as all other transitions have been in the past,” Mr Shibulal said. “We are also making other organisational changes to strengthen our market position and ability to serve our clients better.”
Infosys, which is known for being the bellwether of India’s flagship $60bn outsourcing industry, has been steadily losing market share to both larger rival Tata Consultancy Services and Cognizant, a rising star in the sector.
Shares in Infosys plunged nearly 10 per cent last month on the day it reported disappointing annual results a downbeat outlook for the next year. The group expects its revenues to grow by between 15-17 per cent, much lower than the 20 per cent analysts had been expecting.
Infosys, whose clients include Goldman Sachs and BP, was hit by the global economic crisis more than its peers as it struggled to innovate and find new markets for expansion.
The biggest concern for the group is the slow and uncertain recovery in the US and European economies, according to Ashok Vemuri, the group’s New York-based global head of banking and capital markets services.
“Europe and North America are concerning,” Mr Vemuri told the Financial Times. “As long as there is uncertainty in the US ahead of the [2012 presidential] elections and the European economy there will always be a cloud over our outlook.”
Friday, April 29, 2011
If Bill Gross Sees U.S. as Shaky, Check Japan: William Pesek
This question leaps to the mind navigating the ruins of Japanese cities like Tagajo. Skylines now look as if Dali’s surrealist brush had a hand in rendering things so out of place. Escher’s mind seems at work, too. Interlocking shapes that shouldn’t exist in the three-dimensional world litter cityscapes that before March 11’s earthquake and tsunami were pretty run of the mill.
The mess one confronts in the northeast -- flattened buildings, fleets of destroyed Toyotas at ports, ships sitting in the middle of streets, the search for bodies -- graphically demonstrates why Standard & Poor’s is so worried about Japan. Concerned about the magnitude of the reconstruction bill, S&P cut Japan’s rating outlook.
So is Japan on the verge of a debt crisis? No, and that may just be the problem.
Rising stocks and bond prices show traders aren’t buying the despair about Japan’s finances. They are focusing on the nation’s $15 trillion of household savings, the government’s latitude to raise taxes and the fact that about 95 percent of public debt is held domestically.
Yet Japan’s day of reckoning will arrive at some point, and the longer it’s delayed, the worse it will be. This is an ideal moment for the bond vigilantes, who from time to time take matters into their own hands and boost yields, to teach Japan a lesson. Nothing of the sort is happening.
Keep Borrowing
On Wednesday, the day S&P threatened to downgrade Japan, credit-default swaps protecting government debt for five years returned to their pre-March 11 trading range. The message to politicians: By all means, continue borrowing with abandon.
It’s not unlike what’s afoot in the U.S. Negativity about America’s budget deficit has investors like Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., abandoning Treasuries. Bond dealers disagree, as evidenced by the 3.32 percent yield on the 10-year note. Broadly speaking, the bond market doesn’t seem worried about the U.S.
Looked at through this lens, traders are even less perturbed by Japan’s debt load; 10-year yields are a paltry 1.2 percent. One explanation for why markets are ignoring S&P is that credit rating companies, wrong on just about every major crisis of the last 15 years, have lost all credibility in Asia.
Complacent Markets
The more worrisome one is that markets are complacent. It’s hard not to draw this conclusion when you trek around the Sendai region, which was inundated by the tsunami. From my vantage point, the initial $300 billion reconstruction estimates are fanciful. So, too, might be S&P’s suggestion that the price tag would, at the high end, be $613 billion. It may cost far more.
The challenges that held Japan back before the quake are more acute now. The one most evident in the tsunami zone is how an aging and shrinking population symbolizes the decline of economic life in rural areas. The question isn’t just how to rebuild, but whether to even bother in some places.
There’s also the question of when to start. Economic logic tells you to begin right away. After a 1995 quake, the city of Kobe acted fast and vibrant growth followed. Such thinking is callous and borderline immoral to the likes of Shintaro Takegawa.
Takegawa, 57, is a Sendai truck driver whose company lost more than 90 percent of its fleet when the oceans poured into the city center. He was intrigued to see a wandering foreigner in his midst and offered me a ride back to the train station, a few kilometers from Sendai’s main port.
Why the Hurry?
“There is a big hurry to rebuild, but we have to have respect for the dead and the missing -- more than 25,000 people,” Takegawa explains. “Why can’t we wait a few months?”
This sentiment is common in Japan’s northeast. I heard it, for example, from police officers in the city of Natori, which was literally wiped off the map last month. My Bloomberg News colleagues who have traveled extensively around Tohoku since March 11 routinely encounter it, too. It underscores the challenges facing a nation anxious to dispatch construction crews.
The nuclear crisis in Fukushima is another wild card. This week, electronics maker Sharp Corp. became the latest company to delay making forecasts for this year, citing difficulty in estimating the financial toll of the last several weeks.
Japan is in bizarre economic territory. Bank of Japan Governor Masaaki Shirakawa isn’t exaggerating when he says the economy faces “strong downward pressure.” That dynamic, coupled with the cost of rebuilding Tohoku, means issuing lots of new debt.
You would think that with Japan’s debt-to-gross domestic product ratio -- already 200 percent -- set to widen, traders would be wary. You would think a nation with a shrinking population would be chastened by markets for over-borrowing and forced to find another way to boost growth.
No, traders are saying all is well and giving Japan the green light to sell bonds. One can only imagine the market surrealism that will begin once that light turns yellow or, worse, red.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
The mess one confronts in the northeast -- flattened buildings, fleets of destroyed Toyotas at ports, ships sitting in the middle of streets, the search for bodies -- graphically demonstrates why Standard & Poor’s is so worried about Japan. Concerned about the magnitude of the reconstruction bill, S&P cut Japan’s rating outlook.
So is Japan on the verge of a debt crisis? No, and that may just be the problem.
Rising stocks and bond prices show traders aren’t buying the despair about Japan’s finances. They are focusing on the nation’s $15 trillion of household savings, the government’s latitude to raise taxes and the fact that about 95 percent of public debt is held domestically.
Yet Japan’s day of reckoning will arrive at some point, and the longer it’s delayed, the worse it will be. This is an ideal moment for the bond vigilantes, who from time to time take matters into their own hands and boost yields, to teach Japan a lesson. Nothing of the sort is happening.
Keep Borrowing
On Wednesday, the day S&P threatened to downgrade Japan, credit-default swaps protecting government debt for five years returned to their pre-March 11 trading range. The message to politicians: By all means, continue borrowing with abandon.
It’s not unlike what’s afoot in the U.S. Negativity about America’s budget deficit has investors like Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., abandoning Treasuries. Bond dealers disagree, as evidenced by the 3.32 percent yield on the 10-year note. Broadly speaking, the bond market doesn’t seem worried about the U.S.
Looked at through this lens, traders are even less perturbed by Japan’s debt load; 10-year yields are a paltry 1.2 percent. One explanation for why markets are ignoring S&P is that credit rating companies, wrong on just about every major crisis of the last 15 years, have lost all credibility in Asia.
Complacent Markets
The more worrisome one is that markets are complacent. It’s hard not to draw this conclusion when you trek around the Sendai region, which was inundated by the tsunami. From my vantage point, the initial $300 billion reconstruction estimates are fanciful. So, too, might be S&P’s suggestion that the price tag would, at the high end, be $613 billion. It may cost far more.
The challenges that held Japan back before the quake are more acute now. The one most evident in the tsunami zone is how an aging and shrinking population symbolizes the decline of economic life in rural areas. The question isn’t just how to rebuild, but whether to even bother in some places.
There’s also the question of when to start. Economic logic tells you to begin right away. After a 1995 quake, the city of Kobe acted fast and vibrant growth followed. Such thinking is callous and borderline immoral to the likes of Shintaro Takegawa.
Takegawa, 57, is a Sendai truck driver whose company lost more than 90 percent of its fleet when the oceans poured into the city center. He was intrigued to see a wandering foreigner in his midst and offered me a ride back to the train station, a few kilometers from Sendai’s main port.
Why the Hurry?
“There is a big hurry to rebuild, but we have to have respect for the dead and the missing -- more than 25,000 people,” Takegawa explains. “Why can’t we wait a few months?”
This sentiment is common in Japan’s northeast. I heard it, for example, from police officers in the city of Natori, which was literally wiped off the map last month. My Bloomberg News colleagues who have traveled extensively around Tohoku since March 11 routinely encounter it, too. It underscores the challenges facing a nation anxious to dispatch construction crews.
The nuclear crisis in Fukushima is another wild card. This week, electronics maker Sharp Corp. became the latest company to delay making forecasts for this year, citing difficulty in estimating the financial toll of the last several weeks.
Japan is in bizarre economic territory. Bank of Japan Governor Masaaki Shirakawa isn’t exaggerating when he says the economy faces “strong downward pressure.” That dynamic, coupled with the cost of rebuilding Tohoku, means issuing lots of new debt.
You would think that with Japan’s debt-to-gross domestic product ratio -- already 200 percent -- set to widen, traders would be wary. You would think a nation with a shrinking population would be chastened by markets for over-borrowing and forced to find another way to boost growth.
No, traders are saying all is well and giving Japan the green light to sell bonds. One can only imagine the market surrealism that will begin once that light turns yellow or, worse, red.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
Morocco Cafe Blast Kills 17 in Tourist Area; U.S. Condemns ‘Terrorist Act’
A blast ripped through a restaurant in downtown Marrakech, Morocco, killing at least 17 people, al Arabiya television reported, citing an unidentified security official who said it was caused by a suicide bomber.
The attack yesterday, which injured about 20 people according to Karim Taj, chief of staff for the North African nation’s communications minister, hit the Argana Restaurant in the Djemma el-Fna square, a popular tourist destination. Six French nationals were among the dead, Al Arabiya television said, without saying where it got the information.
“Killing innocent people in this way could be nothing but an act of terror,” Taj said in an interview yesterday.
The attack was the deadliest in Morocco since 2003, when suicide bombers simultaneously struck five sites in Casablanca, killing more than 40 people and wounding at least 100. It struck at the heart of Morocco’s tourism industry, which accounts for almost 10 percent of gross domestic product. Revenue from tourism was the biggest foreign-currency earner last year, drawing 56.6 billion dirhams ($7 billion).
“Acts of terrorism must not be tolerated wherever and whenever they occur,” U.S. Secretary of State Hillary Clinton said in a statement released in Washington last night. French President Nicolas Sarkozy also condemned the act of terrorism, and United Nations Secretary-General Ban Ki-moon expressed his “firm rejection of the use of indiscriminate violence against innocent civilians.”
Stocks Fall
Morocco’s MADEX Free Float Index (MOSEMDX) fell as much as 3.5 percent and declined 1.6 percent, the most since April 1, to 9,694.51 at the 3:30 p.m. close of trading in Casablanca yesterday.
“Foreigners are getting out,” Amine Larhrib, head of the international desk at CDG Capital Bourse, said in a telephone interview yesterday from Casablanca. “They’re afraid of getting stuck like they did in Egypt. This is just a normal reaction to the news, but I think this is an isolated incident.”
A series of bombings occurred in 2007 in Casablanca, including two that were detonated simultaneously outside the U.S. Consulate General and the American Language Center, according to the U.S. State Department website. It notes that “the potential for terrorist violence against U.S. citizens and interests remains high in Morocco.”
No U.S. Casualties
No U.S. casualties from the explosion have been reported, Liz Gracon, a U.S. public affairs officer, said yesterday in a telephone interview from Casablanca.
The popular protests that ousted Tunisian President Zine El Abidine Ben Ali and Egyptian President Hosni Mubarak have spread to Morocco, though they have been smaller and more peaceful. Morocco’s King Mohammed VI pledged on March 9 to create a commission to review the country’s constitution by June and for a referendum to be held after that. He promised to allow religious freedom and more transparent justice.
Morocco “will confront this hideous criminal act” and is “determined to press ahead with its democratic project,” Taj said.
The attack yesterday, which injured about 20 people according to Karim Taj, chief of staff for the North African nation’s communications minister, hit the Argana Restaurant in the Djemma el-Fna square, a popular tourist destination. Six French nationals were among the dead, Al Arabiya television said, without saying where it got the information.
“Killing innocent people in this way could be nothing but an act of terror,” Taj said in an interview yesterday.
The attack was the deadliest in Morocco since 2003, when suicide bombers simultaneously struck five sites in Casablanca, killing more than 40 people and wounding at least 100. It struck at the heart of Morocco’s tourism industry, which accounts for almost 10 percent of gross domestic product. Revenue from tourism was the biggest foreign-currency earner last year, drawing 56.6 billion dirhams ($7 billion).
“Acts of terrorism must not be tolerated wherever and whenever they occur,” U.S. Secretary of State Hillary Clinton said in a statement released in Washington last night. French President Nicolas Sarkozy also condemned the act of terrorism, and United Nations Secretary-General Ban Ki-moon expressed his “firm rejection of the use of indiscriminate violence against innocent civilians.”
Stocks Fall
Morocco’s MADEX Free Float Index (MOSEMDX) fell as much as 3.5 percent and declined 1.6 percent, the most since April 1, to 9,694.51 at the 3:30 p.m. close of trading in Casablanca yesterday.
“Foreigners are getting out,” Amine Larhrib, head of the international desk at CDG Capital Bourse, said in a telephone interview yesterday from Casablanca. “They’re afraid of getting stuck like they did in Egypt. This is just a normal reaction to the news, but I think this is an isolated incident.”
A series of bombings occurred in 2007 in Casablanca, including two that were detonated simultaneously outside the U.S. Consulate General and the American Language Center, according to the U.S. State Department website. It notes that “the potential for terrorist violence against U.S. citizens and interests remains high in Morocco.”
No U.S. Casualties
No U.S. casualties from the explosion have been reported, Liz Gracon, a U.S. public affairs officer, said yesterday in a telephone interview from Casablanca.
The popular protests that ousted Tunisian President Zine El Abidine Ben Ali and Egyptian President Hosni Mubarak have spread to Morocco, though they have been smaller and more peaceful. Morocco’s King Mohammed VI pledged on March 9 to create a commission to review the country’s constitution by June and for a referendum to be held after that. He promised to allow religious freedom and more transparent justice.
Morocco “will confront this hideous criminal act” and is “determined to press ahead with its democratic project,” Taj said.
India shuns US in $11bn fighter deal
India has shortlisted European jet fighters, in preference to US and Russian rivals, in a hotly contested $11bn competition to supply the Indian air force with advanced combat aircraft.
At stake is a deal to equip India with 126 multi-role fighter jets in one of the world’s largest military contracts. The winning bid is expected to shape India’s air power for the next three decades and serve as the bedrock of a strategic partnership.
After trials, India selected France’s Dassault Rafale and the multinational Eurofighter Typhoon – both currently operating over Libya – to compete in the next stage of the competition, according to India’s defence ministry. A spokesman told the Financial Times that a final decision would be taken within a year.
The move will be a blow to the US. Washington strongly lobbied India to buy its aircraft as payback for the landmark Indian-US civil nuclear deal in 2008. The agreement – brokered by Manmohan Singh, Indian premier, and then-US president George W. Bush – brought India’s nuclear programme out of decades of global isolation.
Timothy Roemer, US ambassador to Delhi, said the US was “deeply disappointed” by the decision not to select US defence companies. Earlier on Thursday, Mr Roemer, a personal friend of Barack Obama, US president, announced his resignation.
While Mr Roemer said he was leaving India for personal reasons, as ambassador he had heavily promoted the US bids. He said he had “accomplished all of the strategic objectives set forth two years ago” when he took the job.
Top Indian officials and politicians had indicated that they wished to buy US military hardware to improve a fast-warming relationship between the two democracies in the wake of the transformative nuclear deal.
The US had pitched Boeing’s F/A-18 Super Hornet and Lockheed’s F-16 Super Viper against the Eurofighter Typhoon, Dassault’s Rafale, Sweden’s Saab Gripen and Russia’s MiG-35.
Defence experts considered the US fighters to be less advanced than some of the competition. But rival bidders were worried that political clout from Washington would give US competitors an advantage. Saab was always considered an outsider but was thought to have a competitively priced bid. Meanwhile, the Russians had earlier secured a partnership with India to build a so-called fifth-generation stealth fighter.
Uday Bhaskar, a defence analyst, said that the jets had been assessed on technical grounds but the final decision could not be divorced from geopolitics. “There can be no doubt that the bilateral US-India relationship will be significantly influenced by this decision,” he said.
The Indian government has in recent months been hit by a series of damaging corruption scandals involving alleged political interference and the integrity of regulation. One consequence, analysts said, was a reluctance to introduce political wrangling into the fighter jet contract.
Siddharth Varadarajan, strategic affairs editor of The Hindu newspaper, said Washington would almost certainly try to press New Delhi to reconsider, as it did successfully in a bitter competition for advanced light helicopters several years ago.
Mr Varadarajan, however, said it would be “virtually impossible” for Mr Singh to override the air force technical evaluations. “He will not be able to manage the politics of cancelling this to mollify the Americans,” he said.
At stake is a deal to equip India with 126 multi-role fighter jets in one of the world’s largest military contracts. The winning bid is expected to shape India’s air power for the next three decades and serve as the bedrock of a strategic partnership.
After trials, India selected France’s Dassault Rafale and the multinational Eurofighter Typhoon – both currently operating over Libya – to compete in the next stage of the competition, according to India’s defence ministry. A spokesman told the Financial Times that a final decision would be taken within a year.
The move will be a blow to the US. Washington strongly lobbied India to buy its aircraft as payback for the landmark Indian-US civil nuclear deal in 2008. The agreement – brokered by Manmohan Singh, Indian premier, and then-US president George W. Bush – brought India’s nuclear programme out of decades of global isolation.
Timothy Roemer, US ambassador to Delhi, said the US was “deeply disappointed” by the decision not to select US defence companies. Earlier on Thursday, Mr Roemer, a personal friend of Barack Obama, US president, announced his resignation.
While Mr Roemer said he was leaving India for personal reasons, as ambassador he had heavily promoted the US bids. He said he had “accomplished all of the strategic objectives set forth two years ago” when he took the job.
Top Indian officials and politicians had indicated that they wished to buy US military hardware to improve a fast-warming relationship between the two democracies in the wake of the transformative nuclear deal.
The US had pitched Boeing’s F/A-18 Super Hornet and Lockheed’s F-16 Super Viper against the Eurofighter Typhoon, Dassault’s Rafale, Sweden’s Saab Gripen and Russia’s MiG-35.
Defence experts considered the US fighters to be less advanced than some of the competition. But rival bidders were worried that political clout from Washington would give US competitors an advantage. Saab was always considered an outsider but was thought to have a competitively priced bid. Meanwhile, the Russians had earlier secured a partnership with India to build a so-called fifth-generation stealth fighter.
Uday Bhaskar, a defence analyst, said that the jets had been assessed on technical grounds but the final decision could not be divorced from geopolitics. “There can be no doubt that the bilateral US-India relationship will be significantly influenced by this decision,” he said.
The Indian government has in recent months been hit by a series of damaging corruption scandals involving alleged political interference and the integrity of regulation. One consequence, analysts said, was a reluctance to introduce political wrangling into the fighter jet contract.
Siddharth Varadarajan, strategic affairs editor of The Hindu newspaper, said Washington would almost certainly try to press New Delhi to reconsider, as it did successfully in a bitter competition for advanced light helicopters several years ago.
Mr Varadarajan, however, said it would be “virtually impossible” for Mr Singh to override the air force technical evaluations. “He will not be able to manage the politics of cancelling this to mollify the Americans,” he said.
Wednesday, April 27, 2011
Sokol Is Accused of Misleading Buffett on Trades
Berkshire Hathaway directors have accused David L. Sokol, once considered a possible successor to Warren E. Buffett, of misleading the company about his personal stake in a lubricant manufacturer that Berkshire recently agreed to acquire.
Mr. Sokol, who resigned in March, never told Mr. Buffett that he had bought his stake in Lubrizol after Citigroup bankers pitched the company as a potential takeover target, according to a report by the audit committee of the Berkshire board that was released on Wednesday.
“His misleadingly incomplete disclosures to Berkshire Hathaway senior management concerning those purchases violated the duty of candor he owed the company,” the report says, which adds that Mr. Sokol may have failed his fiduciary duty under the law of Delaware, where Berkshire is incorporated.
The accusations are a stark turnaround for Berkshire, which had been careful not to criticize its former star manager. Indeed, when Mr. Buffett announced Mr. Sokol’s resignation on March 30, he said, “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful.”
Berkshire’s annual shareholder meeting is on Saturday, an event in Omaha known as the Woodstock of capitalism that is attended by thousands. Investors and journalists had been expected to try to question Mr. Buffett about Mr. Sokol and the Lubrizol trades. The board’s report, which finds no fault with Mr. Buffett’s handling of the affair, could mute some of the scrutiny facing Berkshire.
The report also concluded that Mr. Sokol defied Berkshire’s insider trading policies by accumulating the personal stake in Lubrizol while orchestrating a potential takeover of the company. Munger, Tolles & Olson, Mr. Buffett’s longtime outside law firm, helped prepare the report, which was presented to Berkshire’s board on Tuesday night. Ronald L. Olson, a partner at the firm, sits on Berkshire’s board.
Berkshire’s board and audit committee are considering whether to pursue “possible legal action against Mr. Sokol to recover any damage the company has sustained, or his trading profits,” the report says.
The Securities and Exchange Commission, meanwhile, is investigating Mr. Sokol’s trading, according to people close to the inquiry.
But Mr. Sokol’s lawyer, Barry W. Levine of Dickstein Shapiro, disputed several major assertions in the report, saying that his client had not traded improperly or violated company policies. Mr. Levine said that Mr. Sokol had been looking at a personal investment in Lubrizol since summer 2010, before Citigroup bankers had pitched Lubrizol. And he said that his client had told Mr. Buffett “twice, not once” about his ownership of Lubrizol shares before Mr. Buffett began discussions with the company.
“I am profoundly disappointed that the audit committee of Berkshire Hathaway would authorize the issuance of its report to the public without the care and decency to ask even a single question of Mr. Sokol,” Mr. Levine said in a statement.
As a Berkshire manager, Mr. Sokol had stressed the importance of integrity and ethics to his employees. In his 2007 self-published book, “Pleased, But Not Satisfied,” Mr. Sokol, wrote: “Integrity is merely doing what is right, even when no one else is looking. It is being honest and candid. It is being forthright and candid.”
Mr. Sokol, 54, resigned from the company in March after it emerged that he had personally bought $10 million worth of stock in Lubrizol shortly before bringing the company to Mr. Buffett’s attention. Berkshire later agreed to buy Lubrizol for $9 billion — causing Lubrizol’s shares to surge and increasing the value of Mr. Sokol’s holding by some $3 million.
The shift in Berkshire’s position toward Mr. Sokol came, the audit committee’s report says, because Mr. Buffett and the company did not have the full story in March. Mr. Sokol’s conversations with Mr. Buffett and others at Berkshire about his investment in Lubrizol were “intended to deceive” and “its effect was to mislead,” the report said.
Most notably, Mr. Sokol failed to tell Mr. Buffett about the central role that Citigroup played in spawning the Lubrizol deal, according to the report. Mr. Buffett is known to mistrust Wall Street, while Mr. Sokol often flew to New York to huddle with bankers about potential deals.
Mr. Sokol first expressed interest in a Lubrizol acquisition in December, after Citigroup bankers recommended the company as a possible takeover target. Mr. Sokol jumped at the idea.
Citigroup then played matchmaker between Mr. Sokol and Lubrizol’s chief executive, James L. Hambrick, shuttling information between the two executives.
On Dec. 17, a Citigroup banker called Lubrizol’s chief executive to let him know about Berkshire’s possible interest. That same day, Citigroup told Mr. Sokol, then chairman of MidAmerican Energy and NetJets, that Mr. Hambrick planned to discuss the matter with his board.
On Jan. 5, 6 and 7, Mr. Sokol accumulated nearly 100,000 Lubrizol shares.
Soon after, Mr. Sokol suggested a Lubrizol deal to Mr. Buffett, who was initially cool to the idea.
When Mr. Buffett asked Mr. Sokol what started his interest in Lubrizol, Mr. Sokol said he owned the stock.
Mr. Sokol did not disclose that he bought the shares only after Citi pitched the company as a potential takeover target. And Mr. Buffett did not ask about the extent of his stake in the company.
The details of Mr. Sokol’s purchases — and Citi’s involvement in the deal — were not known until a bank representative told Mr. Buffett after the deal was announced on March 14.
“This was the first time Mr. Buffett heard that investment bankers played any role in introducing Lubrizol to Mr. Sokol, and did not square with Mr. Sokol’s remark in January that he had come to know Lubrizol by owning the stock,” the report said.
The report did not take Mr. Buffett to task for failing to press Mr. Sokol for additional details. Some analysts and corporate governance experts have criticized Mr. Buffett for trusting Mr. Sokol’s original account of the situation.
“It did not cross Mr. Buffett’s mind at that time that Mr. Sokol might have bought Lubrizol shares after seeking through investment bankers to initiate discussions with Lubrizol concerning a possible Berkshire Hathaway acquisition of Lubrizol,” the report said.
Shortly before Berkshire publicly disclosed Mr. Sokol’s resignation, he had one last chance to set the record straight.
Mr. Buffett allowed Mr. Sokol to edit for accuracy an advance copy of the press release announcing his resignation.
Mr. Sokol deleted only one sentence that implied that he resigned because the Lubrizol trades would hinder his chances of succeeding Mr. Buffett.
Mr. Sokol, according to the report, said the sentence was inaccurate.
Mr. Sokol, who resigned in March, never told Mr. Buffett that he had bought his stake in Lubrizol after Citigroup bankers pitched the company as a potential takeover target, according to a report by the audit committee of the Berkshire board that was released on Wednesday.
“His misleadingly incomplete disclosures to Berkshire Hathaway senior management concerning those purchases violated the duty of candor he owed the company,” the report says, which adds that Mr. Sokol may have failed his fiduciary duty under the law of Delaware, where Berkshire is incorporated.
The accusations are a stark turnaround for Berkshire, which had been careful not to criticize its former star manager. Indeed, when Mr. Buffett announced Mr. Sokol’s resignation on March 30, he said, “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful.”
Berkshire’s annual shareholder meeting is on Saturday, an event in Omaha known as the Woodstock of capitalism that is attended by thousands. Investors and journalists had been expected to try to question Mr. Buffett about Mr. Sokol and the Lubrizol trades. The board’s report, which finds no fault with Mr. Buffett’s handling of the affair, could mute some of the scrutiny facing Berkshire.
The report also concluded that Mr. Sokol defied Berkshire’s insider trading policies by accumulating the personal stake in Lubrizol while orchestrating a potential takeover of the company. Munger, Tolles & Olson, Mr. Buffett’s longtime outside law firm, helped prepare the report, which was presented to Berkshire’s board on Tuesday night. Ronald L. Olson, a partner at the firm, sits on Berkshire’s board.
Berkshire’s board and audit committee are considering whether to pursue “possible legal action against Mr. Sokol to recover any damage the company has sustained, or his trading profits,” the report says.
The Securities and Exchange Commission, meanwhile, is investigating Mr. Sokol’s trading, according to people close to the inquiry.
But Mr. Sokol’s lawyer, Barry W. Levine of Dickstein Shapiro, disputed several major assertions in the report, saying that his client had not traded improperly or violated company policies. Mr. Levine said that Mr. Sokol had been looking at a personal investment in Lubrizol since summer 2010, before Citigroup bankers had pitched Lubrizol. And he said that his client had told Mr. Buffett “twice, not once” about his ownership of Lubrizol shares before Mr. Buffett began discussions with the company.
“I am profoundly disappointed that the audit committee of Berkshire Hathaway would authorize the issuance of its report to the public without the care and decency to ask even a single question of Mr. Sokol,” Mr. Levine said in a statement.
As a Berkshire manager, Mr. Sokol had stressed the importance of integrity and ethics to his employees. In his 2007 self-published book, “Pleased, But Not Satisfied,” Mr. Sokol, wrote: “Integrity is merely doing what is right, even when no one else is looking. It is being honest and candid. It is being forthright and candid.”
Mr. Sokol, 54, resigned from the company in March after it emerged that he had personally bought $10 million worth of stock in Lubrizol shortly before bringing the company to Mr. Buffett’s attention. Berkshire later agreed to buy Lubrizol for $9 billion — causing Lubrizol’s shares to surge and increasing the value of Mr. Sokol’s holding by some $3 million.
The shift in Berkshire’s position toward Mr. Sokol came, the audit committee’s report says, because Mr. Buffett and the company did not have the full story in March. Mr. Sokol’s conversations with Mr. Buffett and others at Berkshire about his investment in Lubrizol were “intended to deceive” and “its effect was to mislead,” the report said.
Most notably, Mr. Sokol failed to tell Mr. Buffett about the central role that Citigroup played in spawning the Lubrizol deal, according to the report. Mr. Buffett is known to mistrust Wall Street, while Mr. Sokol often flew to New York to huddle with bankers about potential deals.
Mr. Sokol first expressed interest in a Lubrizol acquisition in December, after Citigroup bankers recommended the company as a possible takeover target. Mr. Sokol jumped at the idea.
Citigroup then played matchmaker between Mr. Sokol and Lubrizol’s chief executive, James L. Hambrick, shuttling information between the two executives.
On Dec. 17, a Citigroup banker called Lubrizol’s chief executive to let him know about Berkshire’s possible interest. That same day, Citigroup told Mr. Sokol, then chairman of MidAmerican Energy and NetJets, that Mr. Hambrick planned to discuss the matter with his board.
On Jan. 5, 6 and 7, Mr. Sokol accumulated nearly 100,000 Lubrizol shares.
Soon after, Mr. Sokol suggested a Lubrizol deal to Mr. Buffett, who was initially cool to the idea.
When Mr. Buffett asked Mr. Sokol what started his interest in Lubrizol, Mr. Sokol said he owned the stock.
Mr. Sokol did not disclose that he bought the shares only after Citi pitched the company as a potential takeover target. And Mr. Buffett did not ask about the extent of his stake in the company.
The details of Mr. Sokol’s purchases — and Citi’s involvement in the deal — were not known until a bank representative told Mr. Buffett after the deal was announced on March 14.
“This was the first time Mr. Buffett heard that investment bankers played any role in introducing Lubrizol to Mr. Sokol, and did not square with Mr. Sokol’s remark in January that he had come to know Lubrizol by owning the stock,” the report said.
The report did not take Mr. Buffett to task for failing to press Mr. Sokol for additional details. Some analysts and corporate governance experts have criticized Mr. Buffett for trusting Mr. Sokol’s original account of the situation.
“It did not cross Mr. Buffett’s mind at that time that Mr. Sokol might have bought Lubrizol shares after seeking through investment bankers to initiate discussions with Lubrizol concerning a possible Berkshire Hathaway acquisition of Lubrizol,” the report said.
Shortly before Berkshire publicly disclosed Mr. Sokol’s resignation, he had one last chance to set the record straight.
Mr. Buffett allowed Mr. Sokol to edit for accuracy an advance copy of the press release announcing his resignation.
Mr. Sokol deleted only one sentence that implied that he resigned because the Lubrizol trades would hinder his chances of succeeding Mr. Buffett.
Mr. Sokol, according to the report, said the sentence was inaccurate.
Mumbai’s Home Sales Drop to Two-Year Low as Unsold Units Climb to a Record
Mumbai home sales dropped to a two- year low in the first quarter as record prices and interest rates at the highest since 2008 crimped demand, increasing the number of unsold units to a record, according to Liases Foras Real Estate Rating & Research Pvt.
Sales in Mumbai, India’s most expensive property market, fell to 9.09 million square feet in the three months ended March, 14 percent lower than the December quarter and the lowest since the first quarter of 2009, Mumbai-based Pankaj Kapoor, founder of Liases Foras said. Unsold stock climbed to 105 million square feet, while the weighted average price of homes rose to a record 9,234 rupees ($208) a square foot.
“This clearly shows the inefficiency in the market, that at higher prices there are no buyers,” Kapoor said in an interview yesterday. “Either prices need to correct or the situation could get worse.” Mumbai’s residential property market will stagnate over the next couple of years until prices decline to match affordability and income levels rise, he said.
Sales fell to 57.47 billion rupees in the three months, a 27 percent drop from the December quarter and the lowest in two years, according to Liases Foras, a real estate research company whose clients include Housing Development Finance Corp. (HDFC), India’s largest mortgage lender.
The nation’s real estate industry is expected to face “large-scale distress” amid rising borrowing costs and shrinking access to credit that may force developers into fire sales for assets, according to Knight Frank LLP.
Unaffordable Prices
Prices have become unaffordable in cities like Mumbai and Delhi, Mark Matthews, a Singapore-based strategist at Macquarie Group Ltd., Australia’s biggest investment bank, said in an interview on April 26. Prices will have to decline or developers won’t be able to sell their projects, he said.
India’s central bank increased interest rates for the eighth time in a year after raising its inflation forecast twice in three months. The Reserve Bank of India last month raised the repurchase rate to 6.75 percent from 6.5 percent and boosted the reverse repurchase rate by 25 basis points to 5.75 percent.
Sales in Delhi and its surrounding areas have climbed 32 percent to 27 million square feet in the quarter, compared with the previous three months, while unsold units are at a record 194 million square feet, Liases Foras said.
The weighted average selling price dropped to 2,673 rupees a square feet, 1.7 percent lower than the December quarter as more affordable housing was sold in areas such as Noida and Greater Noida, near Delhi, Kapoor said.
Sales in Mumbai, India’s most expensive property market, fell to 9.09 million square feet in the three months ended March, 14 percent lower than the December quarter and the lowest since the first quarter of 2009, Mumbai-based Pankaj Kapoor, founder of Liases Foras said. Unsold stock climbed to 105 million square feet, while the weighted average price of homes rose to a record 9,234 rupees ($208) a square foot.
“This clearly shows the inefficiency in the market, that at higher prices there are no buyers,” Kapoor said in an interview yesterday. “Either prices need to correct or the situation could get worse.” Mumbai’s residential property market will stagnate over the next couple of years until prices decline to match affordability and income levels rise, he said.
Sales fell to 57.47 billion rupees in the three months, a 27 percent drop from the December quarter and the lowest in two years, according to Liases Foras, a real estate research company whose clients include Housing Development Finance Corp. (HDFC), India’s largest mortgage lender.
The nation’s real estate industry is expected to face “large-scale distress” amid rising borrowing costs and shrinking access to credit that may force developers into fire sales for assets, according to Knight Frank LLP.
Unaffordable Prices
Prices have become unaffordable in cities like Mumbai and Delhi, Mark Matthews, a Singapore-based strategist at Macquarie Group Ltd., Australia’s biggest investment bank, said in an interview on April 26. Prices will have to decline or developers won’t be able to sell their projects, he said.
India’s central bank increased interest rates for the eighth time in a year after raising its inflation forecast twice in three months. The Reserve Bank of India last month raised the repurchase rate to 6.75 percent from 6.5 percent and boosted the reverse repurchase rate by 25 basis points to 5.75 percent.
Sales in Delhi and its surrounding areas have climbed 32 percent to 27 million square feet in the quarter, compared with the previous three months, while unsold units are at a record 194 million square feet, Liases Foras said.
The weighted average selling price dropped to 2,673 rupees a square feet, 1.7 percent lower than the December quarter as more affordable housing was sold in areas such as Noida and Greater Noida, near Delhi, Kapoor said.
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