Indian Economy - News & Updates - Archive

[Contrarian]

Vedanta project under fresh scrutiny

NEW DELHI: The Rs 4,000 crore bauxite and alumina refinery project of Vedanta Aluminium, a unit of London-listed Vedanta Resources, will now face scrutiny by the central empowered committee (CEC) and forest advisory committee (FAC) under the environment law.

This was ordered by the Supreme Court on Friday after the Forest Bench comprising Chief Justice Y K Sabharwal and Justices Arijit Pasayat and R V Raveendran took into account the strong opposition to the project by CEC on the ground that it will harm the ecology of the forest area in southern Orissa.

The court accepted Solicitor General G E Vahanvati's suggestion on behalf of the Centre that CEC could give its objections to the technical committee report clearing the project and the same would be placed for consideration of the FAC, which is likely to be constituted by December 15.

The technical committee had given its clearance after the Wildlife Institute of India (WII) in its impact assessment report had cleared the project to be located at Lanjigarh.

In its report to ministry of environment and forests, WII had green signalled the project but with advisories ranging from taking care of the elephant habitat to managing the natural springs and tribal life.

However, CEC, which was opposed to it right from the very beginning, maintained that the project would be harmful for the environment.

 

[Contrarian]

Tighter Sebi scrutiny for firms facing enquiry

MUMBAI: Market regulator Sebi on Friday said it would hold back its final observations on the offer documents for 45 or 90 days in case an enquiry, prosecution or a regulatory action is pending against a company seeking to raise funds from the capital markets.

The firms tapping capital markets can do so only after they get Sebi's final observation on offer document.

Though Sebi maintained that no person is presumed guilty unless proved so, it was in the interest of the investors to impose restraints on companies, which are facing investigation, adjudication or prosecution.

In case the entity is issued a show cause notice, Sebi would keep its final observations on the company's offer document in abeyance for 90 days.

After 90 days, the watchdog will go ahead with final observations on offer document in case the action-taking authority does not pass any interim or final order in the matter, a Sebi statement stated.

Observations on the draft offer document would be suspended for 45 days if the appropriate authority has found probable cause for enquiry or prosecution on the entity aspiring to tap capital markets.

If the respective authority, after ascertaining the cause for enquiry, issues a show cause notice to the entity, Sebi would extend its final observations after a period of 90 days.

"It is in the interest of the investors and the market that some reasonable restrictions be imposed when any form of investigation, enquiry, adjudication or prosecution has been initiated against the entities," Sebi said.

 

[Contrarian]

Oracle ups bid for India's I-flex, shares soar

MUMBAI/SAN FRANCISCO: Oracle boosted its offer for Indian banking software provider i-flex Solutions to $1.3 billion, driving up i-flex shares 17% to a record high.

Oracle, the world's biggest maker of database software, said it wanted to take its stake in i-flex to 90% and raised the price it is willing to pay to Rs 2,100 per share, up 42% from Rs 1,475 previously.

The revised offer, which Oracle said was final, represented a 20% premium to i-flex's closing price on Thursday. It values i-flex at 49 times forecast earnings, versus a sector average of Indian application software makers of 24.

"It's difficult to say what business logic they see," said Amish Choksi, V-P of institutional equities at Edelweiss Securities in Mumbai.

"I think they have not got the kind of response they expected, which is pushing them to raise the offer price." i-flex shares traded up 16.5% at Rs 2,036 in a Mumbai market, down 0.6%. They had earlier hit a record of Rs 2,055, up 17.4%.

"The offer price is quite good to tempt any domestic shareholder," said SP Tulsian, an independent consultant. "At least now Oracle should get a positive response. Shareholders should not have any reservations when so many other good stocks are there."

Oracle already owns 55% of i-flex and in September offered to pay up to $531 million to increase its stake to 75%.

"There will not be another open offer and Oracle will not undertake a delisting for the next five years unless i-flex shares are selling at a significantly lower price than they are today," Oracle CEO Larry Ellison said.

 

[Contrarian]

MUL to invest Rs 9,000 cr for upgradation

CHENNAI: Maruti Udyog (MUL) is drawing an ambitious investment plan to upgrade its capacities. The capex programme will require Rs 9,000 crore by 2010.

Jagdish Khattar, MD, MUL said, "We will invest in increasing new plant capacity, transmission and diesel plants and upgrade Gurgaon plant."

The diesel and transmission plant will consume Rs 2,500 crore, wherein the engine capacity will be increased from the present one lakh units a year to three lakh units.

The new plant in Manesar will make three lakh cars a year from the present capacity of one lakh cars. The budget for this will be Rs 2,500 crore.

The Gurgaon plant, will get a face lift, which will see Rs 4,000 crore investments. By 2010, when all these are completed, MUL will have a capacity to make a million cars a year. The company can now make six lakh cars a year.

According to auto analysts, the Indian passenger car is expected to touch two million cars a year by then. When MUL launched its new car Zen Estilo in New Delhi, there was one VIP visitor who was not noticed — CEO of Suzuki Pakistan.

"In fact, we have now been asked to assist Suzuki’s operation in Pakistan, Indonesia and a few Latin American markets. We have started knowledge sharing sessions with our counterparts in these countries," Khattar said.

"We are planning to double the service capacity. We have asked our production team to chalk out work-shop strategies to increase throughput at dealer workshops," he added.

 

[Contrarian]

LSE plans to set up research centre in India

NEW DELHI: The London School of Economics has an India connection which is not known to many. In 1912, industrialist Sir Ratan Tata donated a huge sum of money to the LSE to fund research on the causes of poverty and ways to alleviate it.

This led to the formation of department of social sciences at LSE, which is its second-largest department today. Now, 94 years later, LSE is looking to renew its India connection this time with a research centre dedicated to the region.

The centre — India Observatory — will focus on India-specific research themes concerning economics, governance, policy and finance.

Says Sarah Worthington, deputy director, LSE, "An increasing number of researchers at LSE are working on issues related to India. Now that we have a critical mass, it made sense to have all research under one umbrella."

The centre was unveiled at LSE Asia Forum in Delhi, but it will become operational only in January 2007. India Observatory, which will operate under LSE’s Asia Research Centre, is being jointly funded by the RBI, SBI and LSE.

They all pitching in with $1 million each, spread over a 10-year period. The funding stands at $3 million. LSE is also exploring more funding options in the UK.

The idea came up when LSE director Howard Davies wanted to establish a chair in honour of IG Patel, former LSE director and a former RBI governor.

During the initial discussions for the IG Patel Chair, RBI governor YV Reddy came up with a suggestion for a centre for India studies, instead of just a chair.

The IG Patel Chair will now be for the director of the India Observatory. Nicholas Stern, a distinguished development economist and former chief economist of the World Bank, will be the first director of the India Observatory.

There is another reason why LSE wants to establish India Observatory. "Institutionally, we want to engage more with a region from where we have a significant proportion of our student and faculty community," says Ruth Kattumuri, head, LSE-India.

There has been a spurt in the growth of Indian and Pakistani students over the last three years, and together they account for the fourth-largest student community at LSE.

India Observatory will also facilitate partnerships with Indian institutions for joint research. Currently, they are working out one such partnership with Tata Institute for Social Sciences.

The centre will help Indian scholars to go to LSE for research for short periods of time. "We want to improve not just the quality of research, but also its dissemination. So the centre will run seminars both in India and the UK to debate issues relevant to the country," says Worthington.

Several business schools have turned the spotlight on India. Be it London Business School, Harvard Business School or Yale and Ross School of Business.

 

[Contrarian]

India gets first chip made at home

NEW DELHI: Communications & IT minister, Dayanidhi Maran on Friday unveiled the first 'Made in India' chip launched by STMicroelectronics NV, Europe's largest chipmaker, signalling the development as a move towards the country becoming a strong hub for electronics and semiconductor manufacturing firms.

Speaking to reporters in New Delhi at the event, the company, which has had a base in India since 1992, said it would invest up to $30 million in India and add 1,300 employees to almost double its work force to 3,000 over the next three years.

Thierry Tingaud, STMicroelectronics' corporate vice president for emerging markets, said investments would be mainly in constructions of design and development centres.

However, although the chip will be sold across the world, the company ruled out setting up a chip manufacturing facility in India in the next five years time.

"It is not on the agenda to start a new plant... Of course, we look at the possibilities (for manufacturing) in every country, but for the next five years there is no plan to have a plant in India," the company's COO, Alain Duthell said.

The Geneva-based company has three design and development centres in Noida — the company's largest design facility outside Europe — that design integrated circuits and develop software solutions for the company.

As per Maran, the Indian semiconductor industry is poised to increase to $15 billion by 2015.

 

[Contrarian]

Indian IT firms go up on value ladder

Indian IT firms, once purely providers of call centre services and payroll processing, are moving up the value ladder faster than anyone had expected.

Many Indian IT companies are offering product design, software design, chip engineering and the kind of corporate asset-deploying advice which was once the sole domain of Western firms like McKinsey and Booz Allen Hamilton, according to Forbes magazine.

"A lot of consulting deals won by the Indians in the last few years have really shocked the industry," said Stephanie Moore, Forrester research analyst.

More and more multinationals are relying on Indian IT firms for fundamental missions. US-based financial services major Citigroup Inc faced a major problem of complications in data processing as a result of its global expansion as it had 59 different versions of banking software across 100 countries.

Hence, it hired an Indian consultant to streamline the processes to a single version. It is estimated that the project, which has so far been implemented in 70 countries, will save the company at least $110 million a year.

Similarly, Northeast Utilities, a US-based company, consolidated three customer information systems into one and six call centres into two, a move expected to save the company $10 million in annual operations and management costs. Indians played a role here too.

American IT giants like IBM and many others who bid for such projects have lost out to Indian IT firms such as I-flex Solutions, Mphasis BFL Group, Infosys Technologies and SlashSupport, says Forbes.

Top five Indian players in consulting like Tata Consultancy Services (TCS), Infosys, Wipro, Satyam and HCL Technologies have averaged 30 percent revenue growth in this fiscal while the largest US players have averaged on meager four percent, according to Datamonitor senior analyst Patrick O'Brien.

The Indian firms view consulting work as a means to maintain their competitive edge in the face of wage inflation in India and the rise of Chinese data processing firms. The labour arbitrage is also not what it used to be.

Wages for project managers in India have increased to 23 percent per year from 2000 to 2004 while salaries for programmers have increased at a rate of 13 percent, according to the McKinsey Global Institute.

In a bid to restrict the spread of Indian IT firms, foreign players are increasingly shifting their operations to India or buying up rival companies.

 

[Contrarian]

ADB to loan $1 bn to India for rural poor

The Asian Development Bank is to loan India $1 billion, the largest ever advance by the bank to a developing country, to help alleviate rural poverty, the Financial Times reported on Saturday.

The development bank is expected to announce the loan on Monday amid concern that failure to broaden the base of India's blistering growth could lead to social conflict, capital flight, falling investment and an economic slowdown.

The package will be aimed at weaning the rural poor away from moneylenders by expanding access to formal finance, the newspaper said, marking a shift in emphasis towards the social sector for the ADB's Indian loans.

Until the end of 2005, nearly 90 per cent of the ADB's loans to India had been invested in infrastructure.

The funds, to be disbursed over three years and to be managed by the Finance Ministry, will boost lending by cooperative banks in five states; Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan and either Gujarat or Orissa.

Economists believe limited access to credit is a big factor behind slowing growth in the farm sector, which provides a livelihood for two-thirds of India's 1.1 billion population.

Reducing rural poverty has been the main policy platform of the Congress-led coalition, which returned to power in 2004 amid discontent at widening inequalities, falling rural incomes and a deepening debt crisis in the countries' 700,000 villages.

 

[Contrarian]

All about the new look of the 'Indian office'

Efficiency is infectious. First it was the software and IT-enabled service companies that chose to change the look and feel of the 'Indian office' by outsourcing their non-core activities. Now healthcare, real estate, airports, malls and retail stores have all jumped on the same bandwagon.

When you walk up and down the corporate corridors of Microsoft, Intel or Coca-Cola offices in Bangalore or Gurgaon, the interior and the environment are much the same as those of their offices in the United States or Europe. That is the miracle of a somewhat nascent culture of facility management in India.

With the increasing presence of multinationals and the rise of the big Indian corporates, companies are looking at not just productivity of employees but also efficient house-keeping, security, horticulture within the office premises, office automation and so on. "But the scope of facility management goes way beyond just these peripheral services. While security and house-keeping form just 10 per cent of the industry, there is a large chunk of business that entails consulting services. This includes estate management where we have to advise the clients on re-location to areas with lesser rentals or on account of ceiling," says Captain Ravee, CEO of Fireball India, one of the leaders in the business.

The niche market for facility management is estimated at about Rs 300 crore. There are international players like CB Richard Ellis, Haden, Knight Frank, Jones Lang LaSalle, Colliers, and home grow ones like Integrated Property Management Services Ltd, a Mahindra venture.

"Domestic players in the market today are moving away from piece meal contracts and looking at strategic alliances. By ensuring a conducive work environment, facility managers will play a vital role in the efficiency of any company," said Nimish Malhotra, vice president, Vipul Facility Management at a seminar on facility management organised by the CII (Northern Region) on Friday.

But the space is fraught with challenges. "Most of the international brands are present only in name as they are working through franchisee models, sub-contracting work to smaller players in India. They neither play a part in training not scaling up of the Indian sub-contractors. Thus the space is still striving to meet international standards of service," adds Ravee.

 

[Neo]

Indians in Gulf to remit $20bn

DUBAI, Dec 8: Some six million Indian expatriates in the six oil-rich Gulf Arab states will send home this year around $20 billion in remittances, a United Arab Emirates official said in remarks published on Friday.

Economy Minister Sheikha Lubna al-Qassemi was speaking at a meeting of Arab and Indian businessmen in Dubai attended by India's minister of commerce and industry, Kamal Nath, the daily Emirates on Friday reported.

It quoted Nath as saying Indians' remittances from the UAE alone would reach $6 billion this year, and that India could easily get an additional $2 billion in investment from Gulf Cooperation Council (GCC) states.

India needs as much as $150 billion in foreign direct investment in the next seven to eight years, while the UAE and other Gulf states are looking at lucrative places to invest in, Qassemi told the gathering.

India, which gets most of its oil from the Gulf, is negotiating a free trade agreement with GCC members Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

GCC Secretary General Abdul Rahman al-Attiyah said in March that a free trade pact would boost the volume of trade between the two sides from an estimated $12.8 billion in 2005 to $15 billion in coming years.

http://www.dawn.com/2006/12/09/ebr10.htm

 

[Neo]

India sees FTA with Gulf Arab nations by end ’07

DUBAI: India expects to sign a free trade deal with Gulf Arab nations by the end of 2007, Indian Minister of Commerce and Industry Kamal Nath said in published remarks on Friday.

He said India, which is negotiating a free-trade agreement (FTA) with the six-member Gulf Cooperation Council (GCC), was keen on attracting Arab investment especially from the rich, oil-producing region flush with funds from high oil prices.

“I think we should try and have it (FTA) by the end of 2007. That’s what we are targeting,” Gulf News quoted Nath as saying. He added that a meeting between India and the GCC would be held in March or April to discuss details of the planned agreement.

While the GCC Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Qatar and Oman is India’s third-largest trading partner, the members are not large investors in the country.

Nath said India needs to spend $400 billion in the next five years on building infrastructure to keep pace with a fast-growing economy.

“There is very little investment in India’s urban infrastructure even to sustain our levels of growth now,” he said. “I think we should easily be able to secure $2 billion additional investment in the next three years from the GCC,” he said, adding that Dubai real estate developer Emaar Properties has so far invested $600 million in its Indian projects.

http://www.thenews.com.pk/daily_detail.asp?id=34854

 

[Neo]

Sunday, December 10, 2006

ADB to loan $1 billion to India for rural poor: report

SINGAPORE: The Asian Development Bank is to loan India $1 billion, the largest ever advance by the bank to a developing country, to help alleviate rural poverty, the Financial Times newspaper reported on Saturday.

The development bank is expected to announce the loan on Monday amid concern that failure to broaden the base of India’s blistering growth could lead to social conflict, capital flight, falling investment and an economic slowdown.

The package will be aimed at weaning the rural poor away from moneylenders by expanding access to formal finance, the newspaper said, marking a shift in emphasis towards the social sector for the ADB’s Indian loans.

Until the end of 2005, nearly 90 percent of the ADB’s loans to India had been invested in infrastructure.

The funds, to be disbursed over three years and to be managed by the finance ministry, will boost lending by cooperative banks in five states; Andhra Pradesh, Madhya Pradesh, Maharashtra, Rajasthan and either Gujarat or Orissa.

Economists believe limited access to credit is a big factor behind slowing growth in the farm sector, which provides a livelihood for two-thirds of India’s 1.1 billion population.

Reducing rural poverty has been the main policy platform of the Congress-led coalition, which returned to power in 2004 amid discontent at widening inequalities, falling rural incomes and a deepening debt crisis in the countries’ 700,000 villages.

 

[Contrarian]

Reliance brokerage suspended by Sebi

MUMBAI: Market regulator Sebi on Monday suspended Anil Dhirubhai Ambani group's brokerage firm, Reliance Shares and Stock Broking Pvt (RSSB), for four months due to violations of fair business practices on as many as 13 counts. Sebi said in an order passed on Monday that RSSB's registration would be suspended for four months with effect from January 1, 2007.

According to the order, RSSB has committed "some serious violations like artificial pricing of trades, omission in mentioning relevant entries in contract notes, conversion of own trades to client trades, omission in mentioning of client ID for execution of trades, consolidation of client orders and unfair trade practices in violation of laws."

"Artificial pricing of trades, for example, has destroyed the sanctity of contract notes, prime evidence of transactions in the secondary market, it said. Besides, omission of most relevant entries in the contract notes defies the purpose of stock exchange trading wherein price of the scrip is determined by market forces," the order said.

"This kind of unfair trade practices cannot be in normal course viewed with any leniency where a stock broker took over the role of a stock exchange in determining the price of a scrip," it added.

Reacting to the order, a RSSB spokesperson said the action relates to alleged procedural defects in the period 1999-2000, when RSSB was part of the combined Reliance group. "RSSB will be filing an appeal before the Securities Appellate Tribunal, challenging the order, and seeking a stay thereof. RSSB now has an insignificant volume of business transactions, and there are no plans to expand the same," the RSSB spokesperson said. He added that this order will not impact Reliance Capital's business since the latter is a separate company under seperate licence.

Sebi said the penalty was reduced from nine months previously, as some violations were technical in nature while some of them have been rectified.

The regulator had ordered an inquiry into the books of accounts, documents and other records of the brokerage firm for transactions conducted on the BSE between April 3, 1999 and November 26, 2000.

 

[Contrarian]

Ansal strikes 2500 acre deal for UP township

MUMBAI: Ansal Properties & Infrastructure, the flagship company of the Sushil Ansal group, has struck a unique deal with the Uttar Pradesh government. The deal gives the company 2,500 acres of land near Delhi to develop into a township.

It's said that the Ansals also have the rights to collect taxes, just like a municipality, although this could not be confirmed. Ordinarily, housing developers levy a monthly charge for maintenance, security and for the upkeep of swimming pools in the case the complex has them. Collection of taxes like a municipality by a developer is unheard of.

The deal, likely to be announced in a day or two, has been cemented with the state government, which issued a letter of intent to Ansal Properties. The company will be purchasing the land, most likely near Dadri, for about Rs 1,000 crore. According to sources, the phased development plan of the township spans 4-7 years and may have some kind of reservation for low-cost housing.

The deal is being termed by industry observers as a bonanza for APIL which is seen to rake in a profit of Rs 10,000 crore by developing the township over next few years. It is expecting the township to generate revenue of Rs 22,000 crore.

When contacted company officials remained tight-lipped about the issue, but did not deny the deal. Only last month, Ansal properties got the licence from the UP government to build a high-tech city in Lucknow. Spread over 2,000 acres, the city will be developed as a elite township with all kinds of facilities like golf club and villas.

 

[Contrarian]

Sensex sheds 400 pts, bank stocks trigger fall

MUMBAI/NEW DELHI: The bulls ran for cover on Monday as the bears went on a rampage in the equity markets. The 30-share sensitive index of Bombay Stock Exchange fell 400 points — the ninth steepest ever — to close at 13,399.43 points.

But the downturn hasn't dampened the mood on Dalal Street. In fact, marketmen welcomed it and called it a long overdue correction.

RBI's decision on Friday evening to raise the cash reserve ratio (CRR) by half a percentage point to 5.5% — which will suck out Rs 13,500 crore liquidity and is expected to push up interest rates — saw a steep fall in the banking stocks when the markets opened on Monday. The mood soon engulfed the entire market. By around 1 PM, the market fell by 538 points to touch lowest intra-day level of 13, 261 points, but later recovered. In the process, investors lost Rs 1.08 lakh crore wealth in one day.

Banks led the fall and the BSE index for banking stocks fell 6.43% as against the sensex which went down 2.9%. Shares of SBI, India's largest commercial bank fell 8.18%, while ICICI Bank lost 6.54%.

FM P Chidambaram, however, allayed fears and said the market would recover soon. He said the rise in the CRR would not affect the profitability of banks and that their share prices would recover soon.

Investors and fund managers echoed the sentiment. Standard Chartered Mutual Fund's CEO Naval Bir Kumar welcomed the fall and termed it as a correction. CEO of Tata Mutual Fund Ved Prakash Chaturvedi felt that it was the beginning of a long due correction, which would give new investors an opportunity to enter the markets. The sensex has gone up by over 50% since June 14, 2006, when it had touched 8,929 points. Such a steep rise in the sensex, made some of the stocks look a little overpriced. As the fundamentals remained intact, Chaturvedi said, a dip in prices would give good opportunities to buy.

Ashish Kapur, CEO, Investshoppe said the correction would not be very deep as there is enough liquidity in the system. Mutual funds have raised large sums of money from the public in November and December. These funds are still to be invested. Besides, many foreign funds are waiting for the correction to happen so that they enter the market. He added a correction of 5% to 10% is expected.

Kapur said unlike in May 2006, there is not much pressure on margins this time as the fall is not very steep. Besides, he said, not many retail investors are involved in future trading this time. "Institutional and big players can withstand the fall," Kapur added.

A margin pressure is created when a fall in the markets creates liabilities for investors. According to the available data, FIIs have taken around 30% of the gross position in the futures and options segment of the market.

But, a senior broker said, as FIIs are not active in the market for some time, the fall may continue for a little longer. In December, normally senior FII executives opt for Christmas break but the trends for the last four years don't reflect inaction by the foreign funds as they have stayed net investors every December, staring 2002.

However, this December, FIIs have so far been net sellers to the tune of Rs 1,671 crore, which a senior broker said was not a very good sign.