What is your position really on Reliance ahead of numbers right now how are you playing the stock?
Deepak Mohoni : Well a little bit the bias has to be on the long side . It has had a pretty good rally for now couple of weeks but it is also coming close to that 1150 where it has tended to reverse far too many times so I think that is a bit of a look out there and even today it has come off the highs a little bit so this is now coming to the point where Reliance meets a lot of sellers.
So it is a question of whether that selling is absorbed or not. If it does get passed 1150 then I think it would be pretty good for the index because of the higher weightage and of course Reliance itself.
Saturday, October 30, 2010
ICICI Bank Q2 net rises 19%, beats forecast
MUMBAI: ICICI Bank, India's No. 2 lender, reported an 18.8 percent rise in quarterly net profit, beating brokerage forecasts, helped by credit growth and drop in provision for bad loans.
Indian banks including rival private-sector lender HDFC Bank are seeing strong loan demand in Asia's third-largest economy, which the International Monetary Fund expects to expand 9.7 percent in 2010.
ICICI Bank said its net profit in July-September, its fiscal second quarter, rose to Rs 1,236 crore ($278 million) from Rs 1,040 crore reported a year earlier.
A Reuters poll of analysts had forecast net profit of Rs 1,169 crore. State Bank of India , the country's top lender, and ICICI and HDFC Bank are seeing an improvement in asset quality on strong revival in business and consumer confidence in India.
HDFC Bank last week met street estimates with a 33-percent rise in quarterly net profit and forecast credit growth at more than 20 percent in this fiscal year.
Shares in ICICI Bank, valued at about $27 billion, have risen 26 percent so far this year, compared with a 38 percent jump in the sector index and 15 percent gain in the main Mumbai market.
Indian banks including rival private-sector lender HDFC Bank are seeing strong loan demand in Asia's third-largest economy, which the International Monetary Fund expects to expand 9.7 percent in 2010.
ICICI Bank said its net profit in July-September, its fiscal second quarter, rose to Rs 1,236 crore ($278 million) from Rs 1,040 crore reported a year earlier.
A Reuters poll of analysts had forecast net profit of Rs 1,169 crore. State Bank of India , the country's top lender, and ICICI and HDFC Bank are seeing an improvement in asset quality on strong revival in business and consumer confidence in India.
HDFC Bank last week met street estimates with a 33-percent rise in quarterly net profit and forecast credit growth at more than 20 percent in this fiscal year.
Shares in ICICI Bank, valued at about $27 billion, have risen 26 percent so far this year, compared with a 38 percent jump in the sector index and 15 percent gain in the main Mumbai market.
Reliance Q2 net seen up, gas prices to boost ONGC
MUMBAI: Reliance Industries Ltd is likely to post a fourth straight rise in quarterly profit, helped by higher gas output from its field off India's east coast and improvements in refining margins.
The company's near-term business outlook will depend on increases in gas production, the outlook for refining margins and investment plans for its newly-found interests in shale gas and telecoms businesses, analysts said. "The market is eagerly anticipating what will be the next big thing by Reliance — will it be an acquisition? Will it be another new business?" said Jagannadham Thunuguntla, strategist and head of research SMC Global Securities, said.
Reliance is pumping about 55-60 million cubic metres of gas a day from KG D6, off India's east coast, and the country's oil secretary said in July the company would be able to pump gas at full capacity during the year to March 2013.
The company, controlled by billionaire Mukesh Ambani who is the world's fourth richest man according to Forbes magazine, has struck three shale gas joint ventures with US firms so far this year. Ambani has made no secret of Reliance's overseas ambitions, and is looking to invest in areas such as shale gas to widen its businesses beyond petrochemicals, refining, oil and natural gas exploration, and retail.
The company has made a dramatic return to the telecom business with the $1 billion acquisition of Infotel Broadband, the only company to win a nationwide licence for broadband wireless spectrum in a government auction.
Analysts said gross refining margins at Reliance's flagship refining business should show signs of sustained recovery at $8 per barrel for the September quarter, up from $7.3 per barrel in April-June.
ONGC State-run explorer Oil and Natural Gas Corp is expected to report a 15 percent rise in quarterly net profit on higher oil prices and also boosted by a gas price increase. ONGC is required to partially subsidise the sale of fuel to state-run retailers, who sell fuel at state-controlled, below-market prices.
The government this year deregulated gasoline prices and has said diesel prices will eventually be freed. For the September quarter, ONGC's subsidy burden was 30.19 billion rupees, an official said earlier this month, compared with about 55.16 billion rupees in June quarter and 26.3 billion rupees in the year-ago quarter.
The Indian government allowed ONGC to charge higher prices for the gas produced from June and this will be the first full quarter of higher gas prices. ONGC expects the higher gas price to add 15-16 billion rupees to quarterly revenue.
The company's near-term business outlook will depend on increases in gas production, the outlook for refining margins and investment plans for its newly-found interests in shale gas and telecoms businesses, analysts said. "The market is eagerly anticipating what will be the next big thing by Reliance — will it be an acquisition? Will it be another new business?" said Jagannadham Thunuguntla, strategist and head of research SMC Global Securities, said.
Reliance is pumping about 55-60 million cubic metres of gas a day from KG D6, off India's east coast, and the country's oil secretary said in July the company would be able to pump gas at full capacity during the year to March 2013.
The company, controlled by billionaire Mukesh Ambani who is the world's fourth richest man according to Forbes magazine, has struck three shale gas joint ventures with US firms so far this year. Ambani has made no secret of Reliance's overseas ambitions, and is looking to invest in areas such as shale gas to widen its businesses beyond petrochemicals, refining, oil and natural gas exploration, and retail.
The company has made a dramatic return to the telecom business with the $1 billion acquisition of Infotel Broadband, the only company to win a nationwide licence for broadband wireless spectrum in a government auction.
Analysts said gross refining margins at Reliance's flagship refining business should show signs of sustained recovery at $8 per barrel for the September quarter, up from $7.3 per barrel in April-June.
ONGC State-run explorer Oil and Natural Gas Corp is expected to report a 15 percent rise in quarterly net profit on higher oil prices and also boosted by a gas price increase. ONGC is required to partially subsidise the sale of fuel to state-run retailers, who sell fuel at state-controlled, below-market prices.
The government this year deregulated gasoline prices and has said diesel prices will eventually be freed. For the September quarter, ONGC's subsidy burden was 30.19 billion rupees, an official said earlier this month, compared with about 55.16 billion rupees in June quarter and 26.3 billion rupees in the year-ago quarter.
The Indian government allowed ONGC to charge higher prices for the gas produced from June and this will be the first full quarter of higher gas prices. ONGC expects the higher gas price to add 15-16 billion rupees to quarterly revenue.
ONGC Q2 net up 6%; lags estimates
NEW DELHI: State-owned Oil and Natural Gas Corp today reported a 6 per cent rise in its net profit to Rs 5,388.77 crore in the quarter ended September 30.
ONGC had posted a net profit of Rs 5,089.64 crore in July-September quarter of 2009-10 fiscal, the company said in a statement.
Sales rose to Rs 18,238.98 crore in Q2 of current fiscal from Rs 15,134.04 crore a year ago.
ONGC said it paid Rs 3,019 crore towards fuel subsidy in the quarter under review, as against Rs 2,630 crore in the Q2 of last fiscal.
The government, which deregulated gasoline prices in late June, had said diesel prices too would be eventually freed.
The company's net realisation on crude sales was $62.75 a barrel after giving refiners IOC, BPCL and HPCL a discount to make up for one-third of their loss on sale of fuel below cost. Its net realisation in the Q2 of last year was $56.41 per barrel.
ONGC's gross realisation (pre-subsidy discount) was $79.21 per barrel as opposed to $70.50 a barrel in the July-September quarter a year ago.
The government allowed ONGC to charge higher prices for the gas produced from June and this was the first full quarter of higher gas prices.
ONGC had posted a net profit of Rs 5,089.64 crore in July-September quarter of 2009-10 fiscal, the company said in a statement.
Sales rose to Rs 18,238.98 crore in Q2 of current fiscal from Rs 15,134.04 crore a year ago.
ONGC said it paid Rs 3,019 crore towards fuel subsidy in the quarter under review, as against Rs 2,630 crore in the Q2 of last fiscal.
The government, which deregulated gasoline prices in late June, had said diesel prices too would be eventually freed.
The company's net realisation on crude sales was $62.75 a barrel after giving refiners IOC, BPCL and HPCL a discount to make up for one-third of their loss on sale of fuel below cost. Its net realisation in the Q2 of last year was $56.41 per barrel.
ONGC's gross realisation (pre-subsidy discount) was $79.21 per barrel as opposed to $70.50 a barrel in the July-September quarter a year ago.
The government allowed ONGC to charge higher prices for the gas produced from June and this was the first full quarter of higher gas prices.
NHPC Q2 net soars 11.92% to Rs 690.18 cr
MUMBAI: State-run hydro power generator NHPC today reported an 11.92 per cent increase in its net profit at Rs 690.18 crore for the second quarter ended September 30.
The power major had posted a net profit of Rs 616.64 crore in the July--September quarter last fiscal, NHPC said in a filing to the Bombay Stock Exchange.
Net sales of the company also increased to Rs 1,240.36 crore in the September quarter from Rs 1,195.39 crore in the same period previous year.
Shares of NHPC were trading at Rs 31.35 a piece, up 0.16 per cent from its previous close on the BSE.
The power major had posted a net profit of Rs 616.64 crore in the July--September quarter last fiscal, NHPC said in a filing to the Bombay Stock Exchange.
Net sales of the company also increased to Rs 1,240.36 crore in the September quarter from Rs 1,195.39 crore in the same period previous year.
Shares of NHPC were trading at Rs 31.35 a piece, up 0.16 per cent from its previous close on the BSE.
Cairn India profit trebles to Rs 1,585 cr in July-Sep quarter
NEW DELHI: Cairn India on Thursday reported a three-fold jump in its net profit to Rs 1,585 crore in the quarter ended September 30, as completion of a pipeline led to jump in crude oil sales from its profilic Rajasthan block.
Cairn reported a net profit of Rs 1,585.08 crore in the July-September period as against Rs 469.51 crore net income in the same period a year ago, the company said in a statement here.
The rise in net profit was mainly because July-September was the first full quarter when the company used the 590-km Barmer (in Rajasthan) to Salaya (in Gujarat) pipeline to sell crude oil produced from the giant Mangala oilfield to Reliance Industries , Essar Oiland Indian Oil Corp (IOC).
Prior to the comissioning of the pipeline, Cairn trucked the crude oil to the refineries.
Cairn sold 10 million barrels of Mangala crude through the pipeline to the refineries in Q2 2010-11 fiscal, the statement said.
"The first full quarter of sales through the pipeline to refineries has generated significant revenues from the Mangala field in Rajasthan," Cairn India CEO Rahul Dhir said.
The pipeline has helped the company to quickly ramp up Mangala field output to peak levels of 125,000 barrels per day or 17 per cent of the nation's domestic oil production.
Cairn said Mangala field has potential to produce even more, but the same would have to be approved by the oil ministry and the sector regulator DGH.
The company said turnover jumped over 10-fold to Rs 2,686.42 crore in the July-September quarter as opposed to Rs 229.78 crore in the year ago period.
It said it raised Rs 2,250 crore through an unsecured non-convertible debenture issue to retire existing loan.
Also during the quarter, Cairn Energy Plc announced a deal to sell up to 51 per cent in Cairn India to London-listed Vedanta Resources for $8.48 billion. Edinburgh-based Cairn Energy hold 62.38 per cent stake in Cairn India.
"This transaction has been approved by shareholders of Cairn Energy. The transaction continues to progress in a consensual way to secure the necessary consents and approvals from the various government authorities and stakeholders," the statement said.
Cairn said it realised $69.5 per barrel for crude oil it sold in Q2 this fiscal as compared to $69.1 a barrel in the same period the previous period last year.
The gas price realisation in Q2 was $4.5 per thousand standard cubic feet (mscf) compared to $3.9 per mscf in Q2 FY 2009-10.
"The Rajasthan per barrel operating cost continues to decline as volumes increase," it said.
The Mangala field, discovered in January 2004, commenced production a year ago.
Cairn reported a net profit of Rs 1,585.08 crore in the July-September period as against Rs 469.51 crore net income in the same period a year ago, the company said in a statement here.
The rise in net profit was mainly because July-September was the first full quarter when the company used the 590-km Barmer (in Rajasthan) to Salaya (in Gujarat) pipeline to sell crude oil produced from the giant Mangala oilfield to Reliance Industries , Essar Oiland Indian Oil Corp (IOC).
Prior to the comissioning of the pipeline, Cairn trucked the crude oil to the refineries.
Cairn sold 10 million barrels of Mangala crude through the pipeline to the refineries in Q2 2010-11 fiscal, the statement said.
"The first full quarter of sales through the pipeline to refineries has generated significant revenues from the Mangala field in Rajasthan," Cairn India CEO Rahul Dhir said.
The pipeline has helped the company to quickly ramp up Mangala field output to peak levels of 125,000 barrels per day or 17 per cent of the nation's domestic oil production.
Cairn said Mangala field has potential to produce even more, but the same would have to be approved by the oil ministry and the sector regulator DGH.
The company said turnover jumped over 10-fold to Rs 2,686.42 crore in the July-September quarter as opposed to Rs 229.78 crore in the year ago period.
It said it raised Rs 2,250 crore through an unsecured non-convertible debenture issue to retire existing loan.
Also during the quarter, Cairn Energy Plc announced a deal to sell up to 51 per cent in Cairn India to London-listed Vedanta Resources for $8.48 billion. Edinburgh-based Cairn Energy hold 62.38 per cent stake in Cairn India.
"This transaction has been approved by shareholders of Cairn Energy. The transaction continues to progress in a consensual way to secure the necessary consents and approvals from the various government authorities and stakeholders," the statement said.
Cairn said it realised $69.5 per barrel for crude oil it sold in Q2 this fiscal as compared to $69.1 a barrel in the same period the previous period last year.
The gas price realisation in Q2 was $4.5 per thousand standard cubic feet (mscf) compared to $3.9 per mscf in Q2 FY 2009-10.
"The Rajasthan per barrel operating cost continues to decline as volumes increase," it said.
The Mangala field, discovered in January 2004, commenced production a year ago.
Indian shares rise 0.6 per cent; Reliance Industries leads
MUMBAI: Indian shares rose 0.6 percent in early trade on Thursday, with Reliance Industries leading the rise, taking cues from strong Asian markets.
At 9:15 a.m. (0345 GMT), the 30-share BSE index was up 0.55 percent at 20,115.78 points, with 25 components advancing. The 50-share NSE index was up 0.4 percent at 6,036.50
At 9:15 a.m. (0345 GMT), the 30-share BSE index was up 0.55 percent at 20,115.78 points, with 25 components advancing. The 50-share NSE index was up 0.4 percent at 6,036.50
Reliance Industries Q2 net up 27.8%, beats f'cast
MUMBAI: Energy major Reliance Industries posted record profit for the September quarter, beating estimates, bolstered by higher gas output from its field off India's east coast and improved refining margins.
The conglomerate, India's largest listed company, has been investing overseas in shale gas assets and has been looking to widen its businesses beyond petrochemicals, refining, oil and natural gas exploration, and retail. "Improved refining margins and high operating rates at all our manufacturing facilities led to a record quarter," Chairman Mukesh Ambani said in a statement.
"We are focused on identifying opportunities that leverage India's unique demographic and market potential," he said. Controlled by Ambani, the world's fourth-richest man according to Forbes magazine, the company has struck three shale gas joint ventures with U.S. firms so far this year. The company also made a dramatic return to the telecoms business with a $1 billion acquisition of Infotel Broadband, the only company to win a nationwide licence for broadband wireless spectrum in a government auction this year.
Reliance is pumping about 55-60 million cubic metres of gas a day from KG D6, off India's east coast, and the country's oil secretary said in July the company would be able to pump gas at full capacity during the year to March 2013.
Gross refining margin at Reliance's flagship refining business in the September quarter was $7.9 per barrel, up from $7.3 per barrel in April-June and in line market estimates of $8 per barrel.
The margins, a key measure of profitability, stood at $6 a barrel in the year-earlier quarter. The refining margins have been trending higher after having halved in the December 2009 quarter. Reliance said net profit rose 28 percent to Rs 49.23 billion ($1.1 billion) in the fiscal second-quarter ended Sept. 30 from 38.52 billion a year earlier, for what the company said was its highest ever quarterly profit.
A Reuters poll had forecast quarterly net profit of Rs 48.3 billion.
Shares in Reliance, valued at nearly $81 billion, have risen 0.6 percent so far in 2010, lagging a nearly 15 percent gain in the main BSE index.
The conglomerate, India's largest listed company, has been investing overseas in shale gas assets and has been looking to widen its businesses beyond petrochemicals, refining, oil and natural gas exploration, and retail. "Improved refining margins and high operating rates at all our manufacturing facilities led to a record quarter," Chairman Mukesh Ambani said in a statement.
"We are focused on identifying opportunities that leverage India's unique demographic and market potential," he said. Controlled by Ambani, the world's fourth-richest man according to Forbes magazine, the company has struck three shale gas joint ventures with U.S. firms so far this year. The company also made a dramatic return to the telecoms business with a $1 billion acquisition of Infotel Broadband, the only company to win a nationwide licence for broadband wireless spectrum in a government auction this year.
Reliance is pumping about 55-60 million cubic metres of gas a day from KG D6, off India's east coast, and the country's oil secretary said in July the company would be able to pump gas at full capacity during the year to March 2013.
Gross refining margin at Reliance's flagship refining business in the September quarter was $7.9 per barrel, up from $7.3 per barrel in April-June and in line market estimates of $8 per barrel.
The margins, a key measure of profitability, stood at $6 a barrel in the year-earlier quarter. The refining margins have been trending higher after having halved in the December 2009 quarter. Reliance said net profit rose 28 percent to Rs 49.23 billion ($1.1 billion) in the fiscal second-quarter ended Sept. 30 from 38.52 billion a year earlier, for what the company said was its highest ever quarterly profit.
A Reuters poll had forecast quarterly net profit of Rs 48.3 billion.
Shares in Reliance, valued at nearly $81 billion, have risen 0.6 percent so far in 2010, lagging a nearly 15 percent gain in the main BSE index.
BharatBerry: India's alternative to BlackBerry service
AIPUR: An Indian firm today launched a software service saying that it provides an alternative to the controversial BlackBerry services that have run into rough weather with the government over interception of its data.
The new service, called 'Bharat Berry', was on testing mode for the past few days and the state Chief Minister Ashok Gehlot formally launched it here today.
"The issue that the online usage of BlackBerry phones cannot be monitored by the government will be fully-solved with our service 'Bharat Berry', a country made compliant product designed keeping in consideration with all necessary Indian laws and works with all BlackBerry and other phones," Data Infosys Ltd founder and CEO Ajay Data said.
He said in order to enable access to the services, including emails, users will be charged Rs 100 per month, and to ensure access and synchronization of calendar and contacts, they will have to pay Rs 50 per month.
The Bharat Berry software can be purchased online and downloaded from the website.
"The service provides advanced push-mail on BlackBerry handsets and ensures that the user remains connected to email, calendar and contacts through the servers hosted in India," said Data.
"It also provides over-the-air (OTA) synchronization of calendar and contacts to outlook, so there will be no need to take backup of attach with the computer," he said, adding that the unique service was developed with months of hard work.
Bharat Berry works through a mix of its very advanced email server known as XGeNPlus and open source technologies.
Besides, unlike BlackBerry, which has servers outside the country making interception difficult, Bharat Berry's servers are hosted in India, in compliance with security demands.
"Unchecked terrorist activities are the major concern of security agencies, as it can escape detection by using BlackBerry's coded services. We are providing a concrete solution to the problem that has left lakhs of BlackBerry phone users in limbo," Data said.
The conflict between BlackBerry and the government has created uncertainty for users.
The government has given RIM, the Canadian firm that provides BlackBerry services, time until end of January 2011 to give its intelligence agencies full access to all the its services.
There are around one million BlackBerry subscribers in India. RIM offers the BlackBerry services in 175 countries.
The new service, called 'Bharat Berry', was on testing mode for the past few days and the state Chief Minister Ashok Gehlot formally launched it here today.
"The issue that the online usage of BlackBerry phones cannot be monitored by the government will be fully-solved with our service 'Bharat Berry', a country made compliant product designed keeping in consideration with all necessary Indian laws and works with all BlackBerry and other phones," Data Infosys Ltd founder and CEO Ajay Data said.
He said in order to enable access to the services, including emails, users will be charged Rs 100 per month, and to ensure access and synchronization of calendar and contacts, they will have to pay Rs 50 per month.
The Bharat Berry software can be purchased online and downloaded from the website.
"The service provides advanced push-mail on BlackBerry handsets and ensures that the user remains connected to email, calendar and contacts through the servers hosted in India," said Data.
"It also provides over-the-air (OTA) synchronization of calendar and contacts to outlook, so there will be no need to take backup of attach with the computer," he said, adding that the unique service was developed with months of hard work.
Bharat Berry works through a mix of its very advanced email server known as XGeNPlus and open source technologies.
Besides, unlike BlackBerry, which has servers outside the country making interception difficult, Bharat Berry's servers are hosted in India, in compliance with security demands.
"Unchecked terrorist activities are the major concern of security agencies, as it can escape detection by using BlackBerry's coded services. We are providing a concrete solution to the problem that has left lakhs of BlackBerry phone users in limbo," Data said.
The conflict between BlackBerry and the government has created uncertainty for users.
The government has given RIM, the Canadian firm that provides BlackBerry services, time until end of January 2011 to give its intelligence agencies full access to all the its services.
There are around one million BlackBerry subscribers in India. RIM offers the BlackBerry services in 175 countries.
Micromax loses its 'Bling' brand name
NEW DELHI: Bollywood hunk Akshay Kumar won't be able to say 'It twinkles!' anymore on television to his wife Twinkle Khanna's antics with a Micromax Bling phone. The Delhi High Court has restrained India's second-largest mobile phone brand Micromax from selling or advertising one of its largest-selling women-oriented mobile phones 'Bling' as it acceded to a trademark violation filed by Delhi-based mobile phone maker Bling Telecom.
As per the order, a copy of which is with ET, the court restrained Micromax, including its employees, agents, representatives, or anyone acting on their behalf, from using the trademark 'Bling' or any other name confusingly similar till the next date of hearing, February 8, 2010.
The court order, dated October 19, restrains the company from displaying the Bling ads on TV and print, for which Micromax paid a hefty undisclosed amount to Akshay Kumar and Twinkle Khanna. Costing around Rs 6,500, the phone, embedded with Swarovski elements, is one of the largest selling women-oriented phones in the market from Micromax. The ad campaign, which shows Twinkle Khanna, flashing her shiny 'Bling' phone in a high street fashion show, was aimed at changing Micromax's image of a low-cost handset company into a branded high fashion phone company.
Micromax declined to comment on the emails and phone calls by ET reporters on the issue. On the other hand, Bling Telecom chairman Rajiv Khanna says the company had filed for the trademark in July 2009 and has since introduced six models under the brand name. "We are the prior users of the trademark 'Bling' in relation to telecom goods such as mobile phones, and the use of the mark Bling by Micromax for mobile phones is without our consent." Bling Telecom also sells mobile phones under the brand name 'Movil' in India.
In contrast, Micromax has become the second-largest mobile phone seller in India after Nokia in two-and-a-half years of the company's advent in the Rs 29,000-crore Indian handset market.
Kunal Bajaj, partner at Analysys Mason, telecom and media consulting firm says Micromax has been successful in grabbing a 10% market share in India with products like Bling. "The phone has been quite successful in grabbing eyeballs, market attention and Micromax has been able to create a new form factor, a unique design specific to Indian consumers and make it a success," he adds. Micromax has distinguished itself from local players, making cheaper versions of Samsung or Nokia and created unique set of features in new products that take only 3-6 months to hit the 12-million handsets a month in the Indian market. The company has even made market leader Nokia lose a chunk of the precious market share over the last few quarters.
As per the order, a copy of which is with ET, the court restrained Micromax, including its employees, agents, representatives, or anyone acting on their behalf, from using the trademark 'Bling' or any other name confusingly similar till the next date of hearing, February 8, 2010.
The court order, dated October 19, restrains the company from displaying the Bling ads on TV and print, for which Micromax paid a hefty undisclosed amount to Akshay Kumar and Twinkle Khanna. Costing around Rs 6,500, the phone, embedded with Swarovski elements, is one of the largest selling women-oriented phones in the market from Micromax. The ad campaign, which shows Twinkle Khanna, flashing her shiny 'Bling' phone in a high street fashion show, was aimed at changing Micromax's image of a low-cost handset company into a branded high fashion phone company.
Micromax declined to comment on the emails and phone calls by ET reporters on the issue. On the other hand, Bling Telecom chairman Rajiv Khanna says the company had filed for the trademark in July 2009 and has since introduced six models under the brand name. "We are the prior users of the trademark 'Bling' in relation to telecom goods such as mobile phones, and the use of the mark Bling by Micromax for mobile phones is without our consent." Bling Telecom also sells mobile phones under the brand name 'Movil' in India.
In contrast, Micromax has become the second-largest mobile phone seller in India after Nokia in two-and-a-half years of the company's advent in the Rs 29,000-crore Indian handset market.
Kunal Bajaj, partner at Analysys Mason, telecom and media consulting firm says Micromax has been successful in grabbing a 10% market share in India with products like Bling. "The phone has been quite successful in grabbing eyeballs, market attention and Micromax has been able to create a new form factor, a unique design specific to Indian consumers and make it a success," he adds. Micromax has distinguished itself from local players, making cheaper versions of Samsung or Nokia and created unique set of features in new products that take only 3-6 months to hit the 12-million handsets a month in the Indian market. The company has even made market leader Nokia lose a chunk of the precious market share over the last few quarters.
Sunday, October 24, 2010
Design: The new business mantra
It is not uncommon for many companies to be totally at their wit’s end if their new businesses are not paying or their diversification strategies are not working. These are companies who are seeking for answers in their marketing, technical and financial strategies and are not able to pinpoint as to where they went wrong. Very often, the answer lies in the ‘design’ that they used and if they used it effectively and adequately.
Since time immemorial, design has been the key element in making a difference and adding value. This is going to continue. Today’s business needs design more than ever before and the sooner the visionaries realise this, the better. Technology and finance play a role, but only to an extent. Design creates the impact and the competitive advantage that any business needs. Design would drive strategy and would have a direct impact on the bottom line. Some of the global corporations have realised this and already set up inhouse design heads with large teams looking into every single opportunity to use design for their brand advantage. This has paid them manifold results in the short term and will continue to do so in the long term.
A company’s business growth strategy rides on two key vehicles — expansion and diversification. Expansion in the current markets with current products is definitely not an easy task, given the fact that technology is easily available and perhaps at much lower costs than a decade ago. Here, design drives the differentiation and supports the marketing endeavour in making your products and brands more and more meaningful to the consumer. Diversification strategy needs to be totally based on design, right from designing the gameplan to designing the product and the related strategies. Any mistake at this stage could not only be expensive but also put you back by several years.
Designing your products is increasingly becoming important, as that drives the research & development strategy for your company. The big question is: what should be the inputs for designing your products and where should it all begin? The data from the consumers is the first point to begin with, but this needs to be analysed and understood in detail before using it for forming business strategies. Designing the entire communication plan for the consumer becomes critical in a large and diversified economy like ours. Here the question is, would the same communication design work for all the markets, would we need a different approach in rural versus urban areas, and so on and so forth. Designing your packaging becomes the next most important step, as one has to reach the products to consumers in a form that is consumable and reusable.
It is, thus, not a surprise that a lot of business consultants are actually design specialists and using a lot of design principles and techniques to input into their business strategies. The challenge, however, is of a different nature and perhaps needs to be overcome before design can become an effective tool in a business enterprise. Very often, design is judged on subjective evaluation and thus, it is not necessary the best idea will go forward. Very often, the organisational culture does not allow the opportunities for creative explorations and the output is judged best if it is in line with ‘our way’ of working.
Since time immemorial, design has been the key element in making a difference and adding value. This is going to continue. Today’s business needs design more than ever before and the sooner the visionaries realise this, the better. Technology and finance play a role, but only to an extent. Design creates the impact and the competitive advantage that any business needs. Design would drive strategy and would have a direct impact on the bottom line. Some of the global corporations have realised this and already set up inhouse design heads with large teams looking into every single opportunity to use design for their brand advantage. This has paid them manifold results in the short term and will continue to do so in the long term.
A company’s business growth strategy rides on two key vehicles — expansion and diversification. Expansion in the current markets with current products is definitely not an easy task, given the fact that technology is easily available and perhaps at much lower costs than a decade ago. Here, design drives the differentiation and supports the marketing endeavour in making your products and brands more and more meaningful to the consumer. Diversification strategy needs to be totally based on design, right from designing the gameplan to designing the product and the related strategies. Any mistake at this stage could not only be expensive but also put you back by several years.
Designing your products is increasingly becoming important, as that drives the research & development strategy for your company. The big question is: what should be the inputs for designing your products and where should it all begin? The data from the consumers is the first point to begin with, but this needs to be analysed and understood in detail before using it for forming business strategies. Designing the entire communication plan for the consumer becomes critical in a large and diversified economy like ours. Here the question is, would the same communication design work for all the markets, would we need a different approach in rural versus urban areas, and so on and so forth. Designing your packaging becomes the next most important step, as one has to reach the products to consumers in a form that is consumable and reusable.
It is, thus, not a surprise that a lot of business consultants are actually design specialists and using a lot of design principles and techniques to input into their business strategies. The challenge, however, is of a different nature and perhaps needs to be overcome before design can become an effective tool in a business enterprise. Very often, design is judged on subjective evaluation and thus, it is not necessary the best idea will go forward. Very often, the organisational culture does not allow the opportunities for creative explorations and the output is judged best if it is in line with ‘our way’ of working.
Ratan Tata shortlisted for Fortune 'Business Person of the Year' honour
BOSTON: Tata Group Chairman Ratan Tata is among eight business leaders from across the world shortlisted by the prestigious Fortune magazine for its 'Business Person of the Year', an honour that will go to the leader who made the "biggest mark" in business in 2010.
Fortune magazine will name its 'Business Person of the Year' on November 18.
The other business honchos in the fray are billionaire Warren Buffett , Apple Chief Steve Jobs , Ford Motor CEO Alan Mulally, Google CEO Eric Schmidt, DuPont CEO Ellen Kullman, McDonald's CEO James Skinner and Netflix CEO Reed Hastings.
On Tata, Fortune said his group's Tata Motors unit restarted orders for the "ultra cheap, high-demand Nano car" and "at the high end, has reinvigorated Jaguar."
For the title, the publication started with 32 business leaders who had been "seeded and matched-up by the editors of Fortune."
In the process of finalising the winner, Fortune will talk to analysts, consultants, executives and former executives, "those moving markets and those playing them."
Fortune has also asked its readers to submit votes online on "which leader you think made a bigger impact in 2010."
The 32 have been narrowed down to eight after two weeks of voting.
In the first week of elimination, Tata won 60 per cent of votes and beat micro-blogging site Twitter co-founder Evan Williams to reach the second round, where he beat Jamie Dimon, CEO of global financial services firm J P Morgan Chase by a similar number of votes.
Tata is pitted against Buffett in the third round of voting and elimination.
On Buffett, Fortune said the Berkshire Hathaway CEO made 2010 the "year of giving it away, getting billionaires to pledge half of their wealth."
Commenting on Jobs, the US publication said "antenna-gate did not dent him and consumers can't get enough of his i-world." Apple is now second to Exxon in market cap.
Online movie rental company Netflix's Hastings "helped drive its largest foe -- Blockbuster-- into bankruptcy, out-innovating peers at every turn, moving beyond DVDs."
Fortune said Schmidt's Google is "still the only search company that matters." The year 2010 belonged to Google's mobile operating system Android, which now has 25 per cent of market.
Fortune magazine will name its 'Business Person of the Year' on November 18.
The other business honchos in the fray are billionaire Warren Buffett , Apple Chief Steve Jobs , Ford Motor CEO Alan Mulally, Google CEO Eric Schmidt, DuPont CEO Ellen Kullman, McDonald's CEO James Skinner and Netflix CEO Reed Hastings.
On Tata, Fortune said his group's Tata Motors unit restarted orders for the "ultra cheap, high-demand Nano car" and "at the high end, has reinvigorated Jaguar."
For the title, the publication started with 32 business leaders who had been "seeded and matched-up by the editors of Fortune."
In the process of finalising the winner, Fortune will talk to analysts, consultants, executives and former executives, "those moving markets and those playing them."
Fortune has also asked its readers to submit votes online on "which leader you think made a bigger impact in 2010."
The 32 have been narrowed down to eight after two weeks of voting.
In the first week of elimination, Tata won 60 per cent of votes and beat micro-blogging site Twitter co-founder Evan Williams to reach the second round, where he beat Jamie Dimon, CEO of global financial services firm J P Morgan Chase by a similar number of votes.
Tata is pitted against Buffett in the third round of voting and elimination.
On Buffett, Fortune said the Berkshire Hathaway CEO made 2010 the "year of giving it away, getting billionaires to pledge half of their wealth."
Commenting on Jobs, the US publication said "antenna-gate did not dent him and consumers can't get enough of his i-world." Apple is now second to Exxon in market cap.
Online movie rental company Netflix's Hastings "helped drive its largest foe -- Blockbuster-- into bankruptcy, out-innovating peers at every turn, moving beyond DVDs."
Fortune said Schmidt's Google is "still the only search company that matters." The year 2010 belonged to Google's mobile operating system Android, which now has 25 per cent of market.
B M Munjal family retains rights to Hero Group
NEW DELHI: The family led by B M Munjal and his sons, owners of the Indian promoter's stake in Hero Honda, will be officially known as the Hero Group, following the division of the $4.2 billion group.
In June, the diversified group was divided on a simple principle of ending the numerous cross holdings between the families of B M Munjal and his three brothers - O P Munjal, Satyanand Munjal and Late Dayanand Munjal.
According to sources, as part of a family settlement, the rights of the Hero Group went to the B M Munjal family. However, existing businesses belonging to the families of his three brothers would be allowed to retain the Hero brand.
After the settlement, Hero Honda, Hero Corporate Services , Rockman Cycles Industries , Hero Mindmine Institute, Easy Bill and Hero Management Service have gone to family of B M Munjal.
While other entities such as Hero Cycles, Hero Motors and Munjal Sales Corporation went to O P Munjal, the members of late Dayanand Munjal, represented by his son Vijay Munjal are now the owners of Hero Exports, Hero Electric, Hero Cycles (Unit II) and Sunbeam Auto.
Satyanand Munjal's family got Munjal Showa, Munjal Auto, Highway Industries, Majestic Auto and Satyam Autotech.
The Hero group, which officially came into existence in 1956, had started its activities in early 1940s as a bicycle maker by the four brothers.
The group currently has over 20 firms, most of which are related to two-wheeler industry.
In June, the diversified group was divided on a simple principle of ending the numerous cross holdings between the families of B M Munjal and his three brothers - O P Munjal, Satyanand Munjal and Late Dayanand Munjal.
According to sources, as part of a family settlement, the rights of the Hero Group went to the B M Munjal family. However, existing businesses belonging to the families of his three brothers would be allowed to retain the Hero brand.
After the settlement, Hero Honda, Hero Corporate Services , Rockman Cycles Industries , Hero Mindmine Institute, Easy Bill and Hero Management Service have gone to family of B M Munjal.
While other entities such as Hero Cycles, Hero Motors and Munjal Sales Corporation went to O P Munjal, the members of late Dayanand Munjal, represented by his son Vijay Munjal are now the owners of Hero Exports, Hero Electric, Hero Cycles (Unit II) and Sunbeam Auto.
Satyanand Munjal's family got Munjal Showa, Munjal Auto, Highway Industries, Majestic Auto and Satyam Autotech.
The Hero group, which officially came into existence in 1956, had started its activities in early 1940s as a bicycle maker by the four brothers.
The group currently has over 20 firms, most of which are related to two-wheeler industry.
Currency volatility may hit IT cos' profits in coming quarters
NEW DELHI: Currency fluctuations are likely to dent the profit margins of Indian software exporters in the coming quarters, as uncertainties persist in the global economy, say analysts.
The country's top three IT players -- Tata Consultancy Services , Infosys Technologies and Wipro -- were affected by foreign exchange volatility in the September quarter this fiscal and their profit margins took a hit.
During Q2 FY11, July-September period, the rupee gained over three per cent against the US dollar, to touch about Rs Rs 45. This year, the rupee has strengthened more than five per cent against the greenback.
"The appreciation of the rupee against the US dollar is likely to hit the profitability of IT companies in the coming quarters. Many players have raised this concern while coming out with their September quarter numbers," CNI Research CMD Kishore P Ostwal said.
Country's top software exporter TCS, which posted a better-than expected 32 per cent growth in the September quarter with a net profit at Rs 2,169 crore, raised concerned over the appreciating rupee.
The company recorded Rs 47-crore foreign exchange loss in Q2. It would be a "big headwind" in the next quarter for the company, TCS said.
Similarly, the country's third-largest software exporter Wipro incurred forex loss of Rs 41.4 crore during Q2 and raised concerns about the macro-economic environment.
Although Infosys did not report a forex loss in Q2, its Chief Financial Officer V Balakrishnan cautioned that the rising rupee would "kill exporters" unless the Reserve Bank of India steps into the market.
Balakrishnan said the company was facing uncertainties related to economic situation, currency and labour market.
Overall, software exporters saw a significant spurt in Q2 revenues, mainly because of new clients.
Some analysts said, however, that currency fluctuations would remain until there is significant recovery in the global economy.
Against the backdrop of sluggish economic conditions, and availability of cheap money in the US, the dollar has in fact taken a beating in the recent times, said one analyst.
He said a stable exchange value for the domestic currency is vital for software exporters, as many of them earn a big chunk of their revenues from the US.
The country's top three IT players -- Tata Consultancy Services , Infosys Technologies and Wipro -- were affected by foreign exchange volatility in the September quarter this fiscal and their profit margins took a hit.
During Q2 FY11, July-September period, the rupee gained over three per cent against the US dollar, to touch about Rs Rs 45. This year, the rupee has strengthened more than five per cent against the greenback.
"The appreciation of the rupee against the US dollar is likely to hit the profitability of IT companies in the coming quarters. Many players have raised this concern while coming out with their September quarter numbers," CNI Research CMD Kishore P Ostwal said.
Country's top software exporter TCS, which posted a better-than expected 32 per cent growth in the September quarter with a net profit at Rs 2,169 crore, raised concerned over the appreciating rupee.
The company recorded Rs 47-crore foreign exchange loss in Q2. It would be a "big headwind" in the next quarter for the company, TCS said.
Similarly, the country's third-largest software exporter Wipro incurred forex loss of Rs 41.4 crore during Q2 and raised concerns about the macro-economic environment.
Although Infosys did not report a forex loss in Q2, its Chief Financial Officer V Balakrishnan cautioned that the rising rupee would "kill exporters" unless the Reserve Bank of India steps into the market.
Balakrishnan said the company was facing uncertainties related to economic situation, currency and labour market.
Overall, software exporters saw a significant spurt in Q2 revenues, mainly because of new clients.
Some analysts said, however, that currency fluctuations would remain until there is significant recovery in the global economy.
Against the backdrop of sluggish economic conditions, and availability of cheap money in the US, the dollar has in fact taken a beating in the recent times, said one analyst.
He said a stable exchange value for the domestic currency is vital for software exporters, as many of them earn a big chunk of their revenues from the US.
24 OCT, 2010, 04.34PM IST,PTI Will examine DoT proposal to merge circles into one zone: TRAI
NEW DELHI: Telecom regulator Trai will examine a recent Department of Telecom (DoT) proposal to merge all 22 telecom circles in the country into a single service area, a move that could lead to the end of costly roaming charges for Indian mobile phone users, an official said on Sunday.
A senior Telecom Regulatory Authority of India (TRAI) official said the regulator will look into the issue of merging all the telecom circles into one, but did not give a clear timeline within which TRAI could come out with a consultation paper on the issue.
The government is considering the merger of the 22 telecom circles in the country into either a single service area or four separate zones to enable subscribers to move freely across states without paying extra charges for roaming.
As per the recommendations of a core team of the Telecom Ministry: "There could be either one service area covering the entire country, or there could be four zones each covering a particular region."
The core team was constituted by the Department of Telecom to give recommendations on strategic issues related to licencing matters. Roaming services allow cellphone users to continuously make and receive calls while travelling outside the geographical constraints of their home network by using a visited network.
Carriers charge a higher rate for roaming. Fees for roaming are not standard and differ from operator to operator. If implemented, the mobile users will not have to shell out extra money when they travel from one state to other. However, the operators will be hit hard if such a step is taken.
Operators had paid a huge premium for bagging 3G airwaves in certain cir
A senior Telecom Regulatory Authority of India (TRAI) official said the regulator will look into the issue of merging all the telecom circles into one, but did not give a clear timeline within which TRAI could come out with a consultation paper on the issue.
The government is considering the merger of the 22 telecom circles in the country into either a single service area or four separate zones to enable subscribers to move freely across states without paying extra charges for roaming.
As per the recommendations of a core team of the Telecom Ministry: "There could be either one service area covering the entire country, or there could be four zones each covering a particular region."
The core team was constituted by the Department of Telecom to give recommendations on strategic issues related to licencing matters. Roaming services allow cellphone users to continuously make and receive calls while travelling outside the geographical constraints of their home network by using a visited network.
Carriers charge a higher rate for roaming. Fees for roaming are not standard and differ from operator to operator. If implemented, the mobile users will not have to shell out extra money when they travel from one state to other. However, the operators will be hit hard if such a step is taken.
Operators had paid a huge premium for bagging 3G airwaves in certain cir
ONGC's first commercial power project to start next year
AGARTALA: The state-owned Oil and Natural Gas Corporation's (ONGC) first ever 726 MW commercial power project would start generating electricity next year, officials said here on Sunday.
"The first unit (363 MW) of the 726 MW power plant would start producing electricity December next year," said Sudhindra Kumar Dube, managing director of theONGC Tripura Power Co Ltd (OTPC), a new company formed for commissioning the project.
The ONGC's biggest power project is being commissioned in Palatana, about 60 km south of here, at a cost of Rs 9,000 crore. "The power project would fully start generating 726 MW power by March 2012," Dube, accompanied by BHEL (Bharat Heavy Electricals Limited) chairman B.P. Rao, said.
The power project chief said that the Bangladesh government has agreed to allow India to use its waterways to transport the turbines and heavy machines for the power project, for which Prime Minister Manmohan Singh had laid the foundation stone in October 2005.
He said that India would develop a jetty in the Ashuganj river port in Meghna river in eastern Bangladesh, 31 km from Agartala and expand the road, if necessary, across the border, to ferry the equipment for the project. He said dispatching the heavy equipment by surface within India (through the mountainous northeastern states) is extremely difficult.
"A consortium comprising of the US-based General Electric (GE) and India's state-run BHEL has been awarded contract to supply the all-important gas turbines for the thermal power project," he added.
According to ONGC officials, the state-run Power Grid Corp of India Limited (PGCIL), OTPC and the northeastern states would set up a 660-km transmission line at the cost of Rs.1,771 crore to hook Palatana with the national grid at Bongaigaon in western Assam.
The much expected commissioning of the power project, a co-generation waste heat recovery power plant and ONGC's first major commercial project, has been delayed due to difficulties in transporting heavy turbines and machineries to south Tripura.
"The first unit (363 MW) of the 726 MW power plant would start producing electricity December next year," said Sudhindra Kumar Dube, managing director of theONGC Tripura Power Co Ltd (OTPC), a new company formed for commissioning the project.
The ONGC's biggest power project is being commissioned in Palatana, about 60 km south of here, at a cost of Rs 9,000 crore. "The power project would fully start generating 726 MW power by March 2012," Dube, accompanied by BHEL (Bharat Heavy Electricals Limited) chairman B.P. Rao, said.
The power project chief said that the Bangladesh government has agreed to allow India to use its waterways to transport the turbines and heavy machines for the power project, for which Prime Minister Manmohan Singh had laid the foundation stone in October 2005.
He said that India would develop a jetty in the Ashuganj river port in Meghna river in eastern Bangladesh, 31 km from Agartala and expand the road, if necessary, across the border, to ferry the equipment for the project. He said dispatching the heavy equipment by surface within India (through the mountainous northeastern states) is extremely difficult.
"A consortium comprising of the US-based General Electric (GE) and India's state-run BHEL has been awarded contract to supply the all-important gas turbines for the thermal power project," he added.
According to ONGC officials, the state-run Power Grid Corp of India Limited (PGCIL), OTPC and the northeastern states would set up a 660-km transmission line at the cost of Rs.1,771 crore to hook Palatana with the national grid at Bongaigaon in western Assam.
The much expected commissioning of the power project, a co-generation waste heat recovery power plant and ONGC's first major commercial project, has been delayed due to difficulties in transporting heavy turbines and machineries to south Tripura.
Essar in talks to set up 3 L bpd refinery in Egypt
CAIRO: Diversified conglomerate, the Essar Group, has expressed its interest to set up an oil refinery in northern Egypt at an estimated cost of about $3.4 billion and talks are on to conduct a feasibility study soon, a senior Egyptian minister has said.
"The company (Essar) has shown its interest in this regard (setting up an oil refinery in northern Egypt). Our Ministry has met with their officials here. We are negotiating on certain points and talks are on. However, we haven't reached a conclusion so far," Egypt's Minister of Trade and Industry, Rachid Mohamed Rachid, said while addressing a media round-table in Cairo.
The Egyptian government had recently announced that the Shashi Ruia-led Essar Group plans to set up an oil refinery in north Egypt that would have a daily production of around 300 thousand barrels per day.
According to the government officials such a project would usually cost around $3.4-billion, .
However, when contacted, Essar officials declined to divulge any details of the project.
"We have operations in all sectors, including oil and gas --upstream and downstream. As a group, we continue to look at synergistic growth and investment opportunities in these sectors in India and other emerging and growing economies. However, it is too early to comment on any specific project," the company said via e-mail.
Meanwhile, according to Egypt's investment body General Authority for Investment (GAFI), several Indian companies such as Essar, Mukesh Ambani-led Reliance Industries and Indian public sector unit Gas Authority of India Ltd (GAIL) have major investment plans in the oil and gas sector in Egypt.
While the Reliance group had in 2007 announced an $10-billion investment in the oil refining and petrochemicals and plastic industries, it has not initiated any project yet.
GAIL , which already operates in Egypt through a joint venture with Egypt Kuwait Holding company National Gas Company (NATGAS), has also announced an USD 6-million investment in gas distribution ventures in Fayoum and Cairo. NATGAS is the largest private local distribution company (LDC) for natural gas in Egypt.
The Indian investments, if they materialise, would not only boost economic and trade ties between both the countries but also help India become the largest player in the refinery sector and cater to the burgeoning local demand in Egypt as also the demand emanating from Gulf Co-operation Council (GCC) countries, according to GAFI. (MORE)
"The company (Essar) has shown its interest in this regard (setting up an oil refinery in northern Egypt). Our Ministry has met with their officials here. We are negotiating on certain points and talks are on. However, we haven't reached a conclusion so far," Egypt's Minister of Trade and Industry, Rachid Mohamed Rachid, said while addressing a media round-table in Cairo.
The Egyptian government had recently announced that the Shashi Ruia-led Essar Group plans to set up an oil refinery in north Egypt that would have a daily production of around 300 thousand barrels per day.
According to the government officials such a project would usually cost around $3.4-billion, .
However, when contacted, Essar officials declined to divulge any details of the project.
"We have operations in all sectors, including oil and gas --upstream and downstream. As a group, we continue to look at synergistic growth and investment opportunities in these sectors in India and other emerging and growing economies. However, it is too early to comment on any specific project," the company said via e-mail.
Meanwhile, according to Egypt's investment body General Authority for Investment (GAFI), several Indian companies such as Essar, Mukesh Ambani-led Reliance Industries and Indian public sector unit Gas Authority of India Ltd (GAIL) have major investment plans in the oil and gas sector in Egypt.
While the Reliance group had in 2007 announced an $10-billion investment in the oil refining and petrochemicals and plastic industries, it has not initiated any project yet.
GAIL , which already operates in Egypt through a joint venture with Egypt Kuwait Holding company National Gas Company (NATGAS), has also announced an USD 6-million investment in gas distribution ventures in Fayoum and Cairo. NATGAS is the largest private local distribution company (LDC) for natural gas in Egypt.
The Indian investments, if they materialise, would not only boost economic and trade ties between both the countries but also help India become the largest player in the refinery sector and cater to the burgeoning local demand in Egypt as also the demand emanating from Gulf Co-operation Council (GCC) countries, according to GAFI. (MORE)
Essar to invest Rs 2K crore on cement, ferro-alloy unit in MP
KHAJURAHO: Diversified conglomerate Essar Group has firmed up plans to invest over Rs 2,000 crore to set up a new cement and ferro-alloy unit in Madhya Pradesh as part of its mega-investment programme in the state.
The group, which has already committed investments worth around Rs 8,000 crore in the state across sectors like steel, power and telecom had last week entered into a pact with the Madhya Pradesh government for a cement and ferro-alloys project.
"We (have) sign(ed) MoUs for setting a cement plant and a ferro-alloys plant with a total investment of over Rs 2,000 crore. We are happy to participate in the growth potential of the state and be a part of industrial development of this state," Essar Group Chairman Shashi Ruia said after attending a global investment meet here.
The group will set up a cement plant with an annual production capacity of five million tonnes. The plant will be built in two phases, with 2 million tonnes of capacity established in the first stage.
The 1-lakh tonne per annum ferro-alloy plant will be built in two phases of 50,000 tonnes each.
"The state offers significant growth opportunities in every sector of the economy whether it is agro and food processing or manufacturing or power generation or tourism or services and higher education.
"This, coupled with excellent irrigation facilities, self-sufficiency in power, abundant natural resources, skilled manpower and above all, the favourable investment climate created by Chief Minister Shivraj Singh Chauhan, makes the state a must-be destination for investment," Ruia said.
To create a talent pool for its projects in the state, the Essar Group said it aims to establish a training academy to impart technical skills to the locals.
"We would like to set up an academy for training the youth of this state in the field of various engineering skills and thereby empower them. We have recently started this process at our Hazira facility and over 250 boys and girls have been enrolled in this academy and at the end of their education, they would be armed with requisite technical skills and knowledge," he added.
The group runs an integrated steel plant in the port town of Hazira, Gujarat.
The two-day investment meet at Khajuraho saw companies like Essar, Videocon, NTPC, GAIL committing investments worth billions of dollars to the state.
The group, which has already committed investments worth around Rs 8,000 crore in the state across sectors like steel, power and telecom had last week entered into a pact with the Madhya Pradesh government for a cement and ferro-alloys project.
"We (have) sign(ed) MoUs for setting a cement plant and a ferro-alloys plant with a total investment of over Rs 2,000 crore. We are happy to participate in the growth potential of the state and be a part of industrial development of this state," Essar Group Chairman Shashi Ruia said after attending a global investment meet here.
The group will set up a cement plant with an annual production capacity of five million tonnes. The plant will be built in two phases, with 2 million tonnes of capacity established in the first stage.
The 1-lakh tonne per annum ferro-alloy plant will be built in two phases of 50,000 tonnes each.
"The state offers significant growth opportunities in every sector of the economy whether it is agro and food processing or manufacturing or power generation or tourism or services and higher education.
"This, coupled with excellent irrigation facilities, self-sufficiency in power, abundant natural resources, skilled manpower and above all, the favourable investment climate created by Chief Minister Shivraj Singh Chauhan, makes the state a must-be destination for investment," Ruia said.
To create a talent pool for its projects in the state, the Essar Group said it aims to establish a training academy to impart technical skills to the locals.
"We would like to set up an academy for training the youth of this state in the field of various engineering skills and thereby empower them. We have recently started this process at our Hazira facility and over 250 boys and girls have been enrolled in this academy and at the end of their education, they would be armed with requisite technical skills and knowledge," he added.
The group runs an integrated steel plant in the port town of Hazira, Gujarat.
The two-day investment meet at Khajuraho saw companies like Essar, Videocon, NTPC, GAIL committing investments worth billions of dollars to the state.
Hike in fuel prices unavoidable: Chidambaram
SIVAGANGA: Describing the rise in prices of petroleum products as "unavoidable", Home Minister P Chidambaram on Saturday said that oil companies continue to sell fuel products, except petrol, at subsidised rates.
"The rise in prices of petroleum products can not be avoided in developing countries," he said at a function late last night at Karaikudi in his native district of Sivaganga, Tamil Nadu, while noting that India imports 70 per cent of its fossil fuel requirement at present.
Nevertheless, the government provides a subsidy of Rs 300 on domestic cooking gas cylinders and Rs 15 per litre of kerosene, he said while inaugurating a State Bank of India ATM at a petrol bunk.
In June, the government had freed petrol pricing from its administrative control, allowing state companies to fix rates in line with the cost of production.
Participating in a separate education loan disbursal function organised by Indian Bank at Vridhachalam in Cuddalore district yesterday, Chidambaram said the scheme providing interest subsidy on educational loans would be available in the ongoing 2010-11 academic year as well.
Giving away educational loans to the tune of Rs 20 lakh on the occasion, he said the Centre launched the interest subsidy scheme in 2009-10 to help economically poor students take up higher education.
He asked students to fully utilise the scheme to pursue higher education.
Chidambaram said the UPA government has provided monetary benefit to the tune of Rs 1,24,000 crore to various weak sections of society in the country. This includes farm loan waivers worth Rs 70,000 crore, educational loans totalling Rs 34,000 crore and Rs 20,000 crore of financial assistance for 30 lakh self-help groups.
The beneficiaries should be thankful to late Prime Minister Indira Gandhi for her foresight in nationalising the country's banks, the Home Minister said.
"The rise in prices of petroleum products can not be avoided in developing countries," he said at a function late last night at Karaikudi in his native district of Sivaganga, Tamil Nadu, while noting that India imports 70 per cent of its fossil fuel requirement at present.
Nevertheless, the government provides a subsidy of Rs 300 on domestic cooking gas cylinders and Rs 15 per litre of kerosene, he said while inaugurating a State Bank of India ATM at a petrol bunk.
In June, the government had freed petrol pricing from its administrative control, allowing state companies to fix rates in line with the cost of production.
Participating in a separate education loan disbursal function organised by Indian Bank at Vridhachalam in Cuddalore district yesterday, Chidambaram said the scheme providing interest subsidy on educational loans would be available in the ongoing 2010-11 academic year as well.
Giving away educational loans to the tune of Rs 20 lakh on the occasion, he said the Centre launched the interest subsidy scheme in 2009-10 to help economically poor students take up higher education.
He asked students to fully utilise the scheme to pursue higher education.
Chidambaram said the UPA government has provided monetary benefit to the tune of Rs 1,24,000 crore to various weak sections of society in the country. This includes farm loan waivers worth Rs 70,000 crore, educational loans totalling Rs 34,000 crore and Rs 20,000 crore of financial assistance for 30 lakh self-help groups.
The beneficiaries should be thankful to late Prime Minister Indira Gandhi for her foresight in nationalising the country's banks, the Home Minister said.
Inflation may have hit plateau: Pranab
SOUTH KOREA: Headline inflation in India, which was at 8.62 per cent in September, may have reached a plateau, Indian Finance Minister Pranab Mukherjee said.
High food prices, which have helped keep broader inflation in India well above RBI's comfort zone of around 5 to 6 per cent, are the result of both supply and demand factors that reflect changing consumption patterns, Mukherjee said.
The Reserve Bank of India, which expects headline WPI inflation to ease to 6 per cent by the end of March, has raised policy rates five times this year to rein in inflation and is widely expected to raise rates by a further 25 basis points on November 2.
"The direction of the inflation rate movement is consistent with the Reserve Bank's projection made in the July review, though the magnitude could be slightly different. Inflation rates seem to have reached a plateau," Mukherjee said in a written response to questions from Reuters emailed late on Saturday.
India's wholesale price index (WPI) inflation was in double-digits for six months through July. Mukherjee said food inflation, which has been stubbornly high and came in at more than 15 per cent in early October on an annualised basis, is both a demand and supply issue.
"High food inflation reflects both demand and supply factors. Demand factors ... reflect changing consumption patterns," said Mukherjee, who was in South Korea for the Group of 20 meeting of finance ministers. Rising incomes fuelled by an economy on track to grow at 8.5 per cent this fiscal year have led Indians to consume more food.
Mukherjee welcomed a G20 deal on International Monetary Fund reforms that underlines the growing clout of developing economies by giving them a bigger voice. "Our complaint was that the quota share should reflect ground reality and economic strengths currently. Otherwise it would have eroded the credibility of the institution. That has now been corrected," Mukherjee said.
He also said further quantitative easing by advanced economies would cause problems, and Indian policymakers will respond depending on the extent of the easing. Emerging economies including India are seeing an influx of fund flows from the developing world as investors seek higher returns, pushing up asset prices and putting upward pressure on currencies including the rupee. The US Fed is expected to embark on another round of asset purchases, which would inject more liquidity into markets.
Mukherjee reiterated the central bank's stated position that India will intervene only if capital flows are "lumpy" and "volatile". Global regulators are still working on a framework for identifying systemically important financial institutions but Mukherjee said Indian banks may be be asked to maintain additional capital and liquidity levels once proposals are finalised at the G20 level.
High food prices, which have helped keep broader inflation in India well above RBI's comfort zone of around 5 to 6 per cent, are the result of both supply and demand factors that reflect changing consumption patterns, Mukherjee said.
The Reserve Bank of India, which expects headline WPI inflation to ease to 6 per cent by the end of March, has raised policy rates five times this year to rein in inflation and is widely expected to raise rates by a further 25 basis points on November 2.
"The direction of the inflation rate movement is consistent with the Reserve Bank's projection made in the July review, though the magnitude could be slightly different. Inflation rates seem to have reached a plateau," Mukherjee said in a written response to questions from Reuters emailed late on Saturday.
India's wholesale price index (WPI) inflation was in double-digits for six months through July. Mukherjee said food inflation, which has been stubbornly high and came in at more than 15 per cent in early October on an annualised basis, is both a demand and supply issue.
"High food inflation reflects both demand and supply factors. Demand factors ... reflect changing consumption patterns," said Mukherjee, who was in South Korea for the Group of 20 meeting of finance ministers. Rising incomes fuelled by an economy on track to grow at 8.5 per cent this fiscal year have led Indians to consume more food.
Mukherjee welcomed a G20 deal on International Monetary Fund reforms that underlines the growing clout of developing economies by giving them a bigger voice. "Our complaint was that the quota share should reflect ground reality and economic strengths currently. Otherwise it would have eroded the credibility of the institution. That has now been corrected," Mukherjee said.
He also said further quantitative easing by advanced economies would cause problems, and Indian policymakers will respond depending on the extent of the easing. Emerging economies including India are seeing an influx of fund flows from the developing world as investors seek higher returns, pushing up asset prices and putting upward pressure on currencies including the rupee. The US Fed is expected to embark on another round of asset purchases, which would inject more liquidity into markets.
Mukherjee reiterated the central bank's stated position that India will intervene only if capital flows are "lumpy" and "volatile". Global regulators are still working on a framework for identifying systemically important financial institutions but Mukherjee said Indian banks may be be asked to maintain additional capital and liquidity levels once proposals are finalised at the G20 level.
India should focus on reining-in inflation: Economist
MUMBAI: Even as Prime Minister Manmohan Singh is confident about a double-digit GDP growth in the coming years, a leading economist said that India should focus on reducing its inflation by rolling back its monetary policy.
"The Government should not be obsessed by the 10 per cent or double-digit growth. An eight per cent growth is fine, its fast enough for a growing economy like India. But what is necessary is to bring down inflation to four per cent," USA's Research Fellow of the Heritage Foundation, Derek Scissors, told PTI on the sidelines of an event here.
A double-digit growth would only result in increasing inflation, he said.
"It (10 per cent growth) is just going to push you to a place where inflation is much worse. An eight per cent growth and four per cent inflation is better for everyone in the country than a 10 per cent GDP growth and 12 per cent inflation. This is not the way the Government should be working," Scissors said.
The Government should be thinking how it could deliver real wealth gains to its people rather than increasing its GDP to 10 per cent, he said.
"To achieve lower inflation rates, the Government should not be borrowing much money. There was a one-time drop in the fiscal deficit because of the telecom auction. But in the long-term, India does not need a deficit. It is growing quite well," Scissors said.
Unless the borrowings are reduced, interests rates would increase and so would inflation, he said. "To reduce inflation, the Government needs to stop over-borrowings. Borrowings will only result in an increase in the rates of interest and also the rate of inflation," Scissors said.
Currently, the inflation is not only supply-factor driven but also monetary-factor driven.
"The Government needs to roll back its monetary policy to keep its inflation low,
"The Government should not be obsessed by the 10 per cent or double-digit growth. An eight per cent growth is fine, its fast enough for a growing economy like India. But what is necessary is to bring down inflation to four per cent," USA's Research Fellow of the Heritage Foundation, Derek Scissors, told PTI on the sidelines of an event here.
A double-digit growth would only result in increasing inflation, he said.
"It (10 per cent growth) is just going to push you to a place where inflation is much worse. An eight per cent growth and four per cent inflation is better for everyone in the country than a 10 per cent GDP growth and 12 per cent inflation. This is not the way the Government should be working," Scissors said.
The Government should be thinking how it could deliver real wealth gains to its people rather than increasing its GDP to 10 per cent, he said.
"To achieve lower inflation rates, the Government should not be borrowing much money. There was a one-time drop in the fiscal deficit because of the telecom auction. But in the long-term, India does not need a deficit. It is growing quite well," Scissors said.
Unless the borrowings are reduced, interests rates would increase and so would inflation, he said. "To reduce inflation, the Government needs to stop over-borrowings. Borrowings will only result in an increase in the rates of interest and also the rate of inflation," Scissors said.
Currently, the inflation is not only supply-factor driven but also monetary-factor driven.
"The Government needs to roll back its monetary policy to keep its inflation low,
India Inc expects sterner RBI measures on Nov 2: RBS survey
MUMBAI: A quarter of corporate India is expecting 0.25 per cent each hike in the mandatory cash reserves (CRR) and the key policy rates by the RBI at its forthcoming policy review, says an RBS India survey.
A large majority of these corporates are also keen on holding to the rupee, which means that they are comfortable with the continuing appreciation of the rupee, and expect the local unit to rise further in the coming months and settle at around 44 to an American dollar.
The survey was carried out early last week among the RBS' top corporate clients, banks, insurance companies and mutual funds to gauge the sense of India Inc in the run-up to the second quarter monetary policy review by the Reserve Bank on November 2.
"Around 75 per cent of the 108 respondents are expecting a 25 bps-one basis point is 0.01 per cent-hike in the repo and reverse repo (short term lending and borrowing rates) in the November policy review, while another 22 per cent expect a 25 bps spike in the CRR or cash reserve ratio, which is the amount of cash that banks park with the central bank to meet the prudential requirement," RBS (Royal Bank of Scotland) India managing director and head of markets Ramit Bhasin told newsmen while releasing the survey findings here over the weekend.
Bhasin further said these companies are also bullish on holding onto the rupee, which has been rising against the US dollar as also against the many other major overseas units for quite some time now, even if it goes past 44 mark.
However, they expect the local unit to stabilise around 45 against the dollar, with most of the clients expecting the rupee to settle around 44.75 by this December and 44.25 by next March.
The industry expects the repo touching 6.25 per cent by December 2010 and March 2011 up from the current 6 per cent, and reverse repo at 5.25 per cent from the present 5 per cent during this time. But a minuscule 11 per cent see these rates remaining unchanged, Bhasin added.
Significantly enough, none of these 108 corporates see the central bank cutting either repo, reverse repo or CRR rates by December or March even if inflationary pressures lessen, the survey said.
Food inflation for the week ended October 14 stood at a high 15.53 per cent while headline inflation for September ruled at an uncomfortable 8.62 per cent.
The break-up of the survey result is follows: 27 per cent see a 25 bps spike in the CRR rate while 71 per cent see the RBI leaving it untouched; 81 per cent see a 25 bps hike in the repo rate, 4 per cent expect a 50 bps hike and 15 per cent expect no change in this key policy rate on November 2; and when it comes to the reverse repo, 76 per cent foresee a 25 bps spike, 19 per cent no change and 5 per cent do not rule out a 50 bps increase in this rate.
It can be noted that since the economy started recovering from the impacts of the 2008-09 global financial meltdown from the last quarter of 2009 on the back of an expansionary monetary policy by RBI and stimulus measures by the government, RBI had effected five rounds of policy tightening measures.
The latest such measure was the mid-quarter review on September 16, when it hiked the reverse repo by 50 bps and repo by 25 bps to narrow down gap(more popularly known as the monetary corridor) between the lending and borrowing rates to 6 and 5 per cent respectively in order to reflect the real interest rate scenario in the economy as also to normalise its monetary policy measures.
A large majority of these corporates are also keen on holding to the rupee, which means that they are comfortable with the continuing appreciation of the rupee, and expect the local unit to rise further in the coming months and settle at around 44 to an American dollar.
The survey was carried out early last week among the RBS' top corporate clients, banks, insurance companies and mutual funds to gauge the sense of India Inc in the run-up to the second quarter monetary policy review by the Reserve Bank on November 2.
"Around 75 per cent of the 108 respondents are expecting a 25 bps-one basis point is 0.01 per cent-hike in the repo and reverse repo (short term lending and borrowing rates) in the November policy review, while another 22 per cent expect a 25 bps spike in the CRR or cash reserve ratio, which is the amount of cash that banks park with the central bank to meet the prudential requirement," RBS (Royal Bank of Scotland) India managing director and head of markets Ramit Bhasin told newsmen while releasing the survey findings here over the weekend.
Bhasin further said these companies are also bullish on holding onto the rupee, which has been rising against the US dollar as also against the many other major overseas units for quite some time now, even if it goes past 44 mark.
However, they expect the local unit to stabilise around 45 against the dollar, with most of the clients expecting the rupee to settle around 44.75 by this December and 44.25 by next March.
The industry expects the repo touching 6.25 per cent by December 2010 and March 2011 up from the current 6 per cent, and reverse repo at 5.25 per cent from the present 5 per cent during this time. But a minuscule 11 per cent see these rates remaining unchanged, Bhasin added.
Significantly enough, none of these 108 corporates see the central bank cutting either repo, reverse repo or CRR rates by December or March even if inflationary pressures lessen, the survey said.
Food inflation for the week ended October 14 stood at a high 15.53 per cent while headline inflation for September ruled at an uncomfortable 8.62 per cent.
The break-up of the survey result is follows: 27 per cent see a 25 bps spike in the CRR rate while 71 per cent see the RBI leaving it untouched; 81 per cent see a 25 bps hike in the repo rate, 4 per cent expect a 50 bps hike and 15 per cent expect no change in this key policy rate on November 2; and when it comes to the reverse repo, 76 per cent foresee a 25 bps spike, 19 per cent no change and 5 per cent do not rule out a 50 bps increase in this rate.
It can be noted that since the economy started recovering from the impacts of the 2008-09 global financial meltdown from the last quarter of 2009 on the back of an expansionary monetary policy by RBI and stimulus measures by the government, RBI had effected five rounds of policy tightening measures.
The latest such measure was the mid-quarter review on September 16, when it hiked the reverse repo by 50 bps and repo by 25 bps to narrow down gap(more popularly known as the monetary corridor) between the lending and borrowing rates to 6 and 5 per cent respectively in order to reflect the real interest rate scenario in the economy as also to normalise its monetary policy measures.
Microfinance, macro problems?
Is it possible to make money while helping people out of poverty? In the last five years or so, one business — microfinance — seemed to suggest that the answer was yes. Look at the numbers: from merely $12 million in 2003, the market for lending tiny amounts of money mainly to groups of women has grown to more than $7 billion now. And analysts expect this to grow to a staggering $50 billion soon.
It’s easy to understand why. Many people in rural India don’t have access to loans from formal banks. In any case, procedures are cumbersome, paperwork intimidating. That explains why people go to moneylenders, who charge them upwards of 50% for loans. Microfinance, based on a model borrowed from Bangladesh, was supposed to change all that.
Micro-credit institutions would make small loans to groups of women at rates lower than what moneylenders charge. These would go into productive investments and defaults would be kept low because the entire community — or a group of women borrowers — would keep an eye on each other to make sure that the funds were used properly and repayments were on time.
Today, it’s reckoned that women’s selfhelp groups (SHGs) reach about 50 million people. Another 20 million are covered by microfinance institutions (MFIs). That leaves about 100 million people who still rely on moneylenders or relatives for loans. That’s a huge untapped market, which explains why analysts are falling over each other to talk up microfinance.
A few months ago, India’s largest micro-credit company, SKS Microfinance, had a hugely successful listing. But now, the whole micro-credit story seems to be fraying at the edges. And that’s even if you discount the churn at the top in SKS. What’s worrying many people is whether it’s possible to keep poor borrowers happy while growing profits fast enough to keep shareholders smiling as well.
In June, the governments of Andhra Pradesh and Kerala asked MFIs to comply with local rules that regulate the money lending activity. A handful of MFIs are contesting this in court. And last week, Andhra Pradesh passed an ordinance to regulate MFIs, one which stops short of capping interest rates.
These southern states are worried about two things: the interest rates charged by the institutions and the possibility that borrowers could be coerced by goons hired by MFIs to make repayments. Andhra Pradesh has good reasons to worry about micro lending. Numbers from the Reserve Bank of India (RBI) show that over 53% of loans there are sourced from moneylenders. Tamil Nadu follows, with moneylenders accounting for 40% of all borrowings. Moneylenders account for more than 30% of all lending in four more states: Bihar, Manipur, Punjab and Rajasthan.
MFIs borrow from banks at around 12% and lend at anything between 25% and 30%. This can be hugely profitable. The return on assets — a ratio used to measure profitability of financial institutions — is 6.8 for SKS Microfinance; it’s 1.7 for HDFC Bank and 1.1 for SBI. Over the years, profits have grown at a fast clip: in the last two years, earnings per share at SKS shot up by 346% and 59% respectively; they expected to rise to 79% by March 2011.
It’s easy to understand why. Many people in rural India don’t have access to loans from formal banks. In any case, procedures are cumbersome, paperwork intimidating. That explains why people go to moneylenders, who charge them upwards of 50% for loans. Microfinance, based on a model borrowed from Bangladesh, was supposed to change all that.
Micro-credit institutions would make small loans to groups of women at rates lower than what moneylenders charge. These would go into productive investments and defaults would be kept low because the entire community — or a group of women borrowers — would keep an eye on each other to make sure that the funds were used properly and repayments were on time.
Today, it’s reckoned that women’s selfhelp groups (SHGs) reach about 50 million people. Another 20 million are covered by microfinance institutions (MFIs). That leaves about 100 million people who still rely on moneylenders or relatives for loans. That’s a huge untapped market, which explains why analysts are falling over each other to talk up microfinance.
A few months ago, India’s largest micro-credit company, SKS Microfinance, had a hugely successful listing. But now, the whole micro-credit story seems to be fraying at the edges. And that’s even if you discount the churn at the top in SKS. What’s worrying many people is whether it’s possible to keep poor borrowers happy while growing profits fast enough to keep shareholders smiling as well.
In June, the governments of Andhra Pradesh and Kerala asked MFIs to comply with local rules that regulate the money lending activity. A handful of MFIs are contesting this in court. And last week, Andhra Pradesh passed an ordinance to regulate MFIs, one which stops short of capping interest rates.
These southern states are worried about two things: the interest rates charged by the institutions and the possibility that borrowers could be coerced by goons hired by MFIs to make repayments. Andhra Pradesh has good reasons to worry about micro lending. Numbers from the Reserve Bank of India (RBI) show that over 53% of loans there are sourced from moneylenders. Tamil Nadu follows, with moneylenders accounting for 40% of all borrowings. Moneylenders account for more than 30% of all lending in four more states: Bihar, Manipur, Punjab and Rajasthan.
MFIs borrow from banks at around 12% and lend at anything between 25% and 30%. This can be hugely profitable. The return on assets — a ratio used to measure profitability of financial institutions — is 6.8 for SKS Microfinance; it’s 1.7 for HDFC Bank and 1.1 for SBI. Over the years, profits have grown at a fast clip: in the last two years, earnings per share at SKS shot up by 346% and 59% respectively; they expected to rise to 79% by March 2011.
'MF sector will adapt to Sebi norms'
The mutual fund industry has been under pressure over the last one year after market regulator Sebi tightened rules to curb misselling by distributors. Distributors now have to directly negotiate the initial commission with investors. Naval Bir Kumar,president and CEO, IDFC Mutual Fund , says the industry is attempting to cope with the changes in the Sebi norms . But margins, he points out, have dropped and there is aneed to raise productivity.
The tightening on the operational fronts like risk management and disclosure norms was long awaited, Kumar says. "The last one year has been one of transition for the asset management industry and all stakeholders connected with it. The industry is still in the throes of this transition. Over a period of time, however, one would expect the industry to respond with simple, yet innovative products, improved customer service and more productive channels of distribution. With changes coming in all financial products, one would expect more congruence in the way to approach investors, he says.
“We can embrace these changes for the retail market only if we create products whose returns are much less volatile and have the flavour of a fixed deposit. Hence, we have been focusing on capital protection funds, asset allocation funds and other hybrid funds such as monthly income funds (MIPs). We are also increasing the range of products for high networth individuals (HNIs) and launching alternative assets class such as private equity funds to attract HNIs.”
Mutual funds complement, and not compete with, other investment avenues like insurance products. It is probably the only product that has all the advantages of tax benefits, liquidity, returns and transparency, he says.
According to him, so far, most investors based their decisions on short-term goals and the industry, on its part, launched several new fund offers in overheated markets. In a market where the industry was thriving on NFO game, products were launched to suit the flavour of the month and distributors’ interest. Kumar reckons that somewhere along the way, an NFO became the primary medium to raise assets than conventional sales and it spawned an entire machinery to that effect. The focus currently is on building performance and assets in the ongoing schemes. Distributors, clients, media and AMCs have all aligned towards that goal.
Another target group, according to him, is retail investors in Tier-II cities. In developed countries, retail investors enter the markets mostly through pension and insurance funds. However, in India, they usually invest directly. “So far, equity has become a product where investors pour money only at the peak and by that time, there is a correction. To overcome these issues, the industry launched the systematic investment plan (SIP). The product is yet to take off in a big way. For the retail investor, bank deposits continue to be the most preferred saving instrument. The trend is, however, changing and investors are looking at MFs as an alternative
The tightening on the operational fronts like risk management and disclosure norms was long awaited, Kumar says. "The last one year has been one of transition for the asset management industry and all stakeholders connected with it. The industry is still in the throes of this transition. Over a period of time, however, one would expect the industry to respond with simple, yet innovative products, improved customer service and more productive channels of distribution. With changes coming in all financial products, one would expect more congruence in the way to approach investors, he says.
“We can embrace these changes for the retail market only if we create products whose returns are much less volatile and have the flavour of a fixed deposit. Hence, we have been focusing on capital protection funds, asset allocation funds and other hybrid funds such as monthly income funds (MIPs). We are also increasing the range of products for high networth individuals (HNIs) and launching alternative assets class such as private equity funds to attract HNIs.”
Mutual funds complement, and not compete with, other investment avenues like insurance products. It is probably the only product that has all the advantages of tax benefits, liquidity, returns and transparency, he says.
According to him, so far, most investors based their decisions on short-term goals and the industry, on its part, launched several new fund offers in overheated markets. In a market where the industry was thriving on NFO game, products were launched to suit the flavour of the month and distributors’ interest. Kumar reckons that somewhere along the way, an NFO became the primary medium to raise assets than conventional sales and it spawned an entire machinery to that effect. The focus currently is on building performance and assets in the ongoing schemes. Distributors, clients, media and AMCs have all aligned towards that goal.
Another target group, according to him, is retail investors in Tier-II cities. In developed countries, retail investors enter the markets mostly through pension and insurance funds. However, in India, they usually invest directly. “So far, equity has become a product where investors pour money only at the peak and by that time, there is a correction. To overcome these issues, the industry launched the systematic investment plan (SIP). The product is yet to take off in a big way. For the retail investor, bank deposits continue to be the most preferred saving instrument. The trend is, however, changing and investors are looking at MFs as an alternative
'China not a threat to Indian steel makers'
Global consumption of finished steel is expected to grow by 10.7% and 5.3% in 2011 and 2012. The country's largest steel producer, Steel Authority of India, is aggressively building up capacity to cash in on the opportunity. SAIL chairman CS Verma lists the challenges faced by the company in an interview withET . Excerpts:
The steel market in the country is looking up again and companies feel they have pricing power. Is the demand sustainable?
There has been about 10% growth in consumption of finished steel in India in the first half of 2010-11. This is among the highest in major steel-consuming countries. User industries such as machinery and equipment manufacturing and automobiles are showing strong growth. Demand from the construction sector is also rising, mainly due to a large number of infrastructure-related projects. Besides, growth is also expected in individual housing and small and medium commercial construction. Strong GDP growth, high savings and investment are spurring growth in the steel industry.
Does the demand justify big-ticket investment in capacity addition and new projects?
Crude steel production for the 66 countries reporting to the World Steel Association (WSA) was 113 million tonnes in August, 4.2% higher year-on-year. Present capacity utilisation is around 80%. De-stocking has also taken place. WSA, in its latest demand forecast, has projected a growth in consumption of finished steel by 10.7% and 5.3% in 2011 and 2012, respectively. While advanced economies are expected to grow 2.6% in 2010, emerging and developing economies are expected to grow at 6%. China, Brazil and India are the major drivers of growth in steel consumption.
How real is the threat of imports from China?
China's steel consumption is still growing in double digits. The Chinese government is also shutting down inefficient units to restrict steel production to what is required for domestic use and is discouraging exports. This, coupled with Chinese domestic prices, withdrawal of export rebates from certain select categories and India's domestic prices, the threat of cheap imports from China is only marginal. In fact, imports from China have fallen 40-45 % in the last five months. However, Indian steel will need to keep a close watch on developments in China.
What kind of fresh investment is the company looking at?
SAIL has set a target of expanding its hot metal production capacity to 23.46 million tonnes by 2012-13. All critical orders for achieving the target capacity have been placed.
The remaining orders are of short-term gestation nature which will be placed after detailed drawings for the equipment and facilities are available. SAIL also has in place an indication plan for expanding capacity to 60 million tonnes by 2020.
What about global footprint for SAIL? Is anything being planned?
Currently, our focus is on acquisition of coking coal and limestone mines abroad. We are open to opportunities in steel if they provide a strategic fit.
When is SAIL's follow-on equity offer expected? What is the delay in filing the draft red herring prospectus (DRHP)?
The SAIL FPO is likely to be issued in early December. In case we miss this deadline, we can only expect it to happen in late January, since markets would be closed for winter break and Christmas. We are in the process of engaging book running lead manager (BRLM). After appointment of BRLM, legal counsel will be appointed for due diligence and preparation of DRHP.
What about Posco-SAIL JV? Do you plan to extend the scope of the proposed JV to other place, apart from Bokaro?
The detailed project report (DPR) for the proposed SAIL-Posco JV is being finalised. The JV agreement would only be entered into after the DPR is approved by the boards of SAIL and Posco. Depending on the success of the envisaged JV plant at Bokaro, new initiatives at other locations can be considered.
What is your view on sharing of profit from mining operations, as proposed in draft Mining Bill?
SAIL is always committed for uplift of the people in the areas it operates and therefore, any proposal or scheme for improving the life of people, particularly the poor, is welcomed by the company. However, SAIL is basically a steel producing company and its profits are mainly through marketing of steel. Constitution of the company and its operations are such that it is not possible to workout profit or loss separately for the mines as the mining activity is not a separate segment of revenue or profit centre. Besides, the steel companies having captive mines are not allowed to sell ore in the open market. So, whatever modalities for compensation are finalised, these need to be practical and implementable. I believe that to ensure a smoother implementation of the provisions of the draft legislation, there is an immediate need for consensus building among stakeholders.
The steel market in the country is looking up again and companies feel they have pricing power. Is the demand sustainable?
There has been about 10% growth in consumption of finished steel in India in the first half of 2010-11. This is among the highest in major steel-consuming countries. User industries such as machinery and equipment manufacturing and automobiles are showing strong growth. Demand from the construction sector is also rising, mainly due to a large number of infrastructure-related projects. Besides, growth is also expected in individual housing and small and medium commercial construction. Strong GDP growth, high savings and investment are spurring growth in the steel industry.
Does the demand justify big-ticket investment in capacity addition and new projects?
Crude steel production for the 66 countries reporting to the World Steel Association (WSA) was 113 million tonnes in August, 4.2% higher year-on-year. Present capacity utilisation is around 80%. De-stocking has also taken place. WSA, in its latest demand forecast, has projected a growth in consumption of finished steel by 10.7% and 5.3% in 2011 and 2012, respectively. While advanced economies are expected to grow 2.6% in 2010, emerging and developing economies are expected to grow at 6%. China, Brazil and India are the major drivers of growth in steel consumption.
How real is the threat of imports from China?
China's steel consumption is still growing in double digits. The Chinese government is also shutting down inefficient units to restrict steel production to what is required for domestic use and is discouraging exports. This, coupled with Chinese domestic prices, withdrawal of export rebates from certain select categories and India's domestic prices, the threat of cheap imports from China is only marginal. In fact, imports from China have fallen 40-45 % in the last five months. However, Indian steel will need to keep a close watch on developments in China.
What kind of fresh investment is the company looking at?
SAIL has set a target of expanding its hot metal production capacity to 23.46 million tonnes by 2012-13. All critical orders for achieving the target capacity have been placed.
The remaining orders are of short-term gestation nature which will be placed after detailed drawings for the equipment and facilities are available. SAIL also has in place an indication plan for expanding capacity to 60 million tonnes by 2020.
What about global footprint for SAIL? Is anything being planned?
Currently, our focus is on acquisition of coking coal and limestone mines abroad. We are open to opportunities in steel if they provide a strategic fit.
When is SAIL's follow-on equity offer expected? What is the delay in filing the draft red herring prospectus (DRHP)?
The SAIL FPO is likely to be issued in early December. In case we miss this deadline, we can only expect it to happen in late January, since markets would be closed for winter break and Christmas. We are in the process of engaging book running lead manager (BRLM). After appointment of BRLM, legal counsel will be appointed for due diligence and preparation of DRHP.
What about Posco-SAIL JV? Do you plan to extend the scope of the proposed JV to other place, apart from Bokaro?
The detailed project report (DPR) for the proposed SAIL-Posco JV is being finalised. The JV agreement would only be entered into after the DPR is approved by the boards of SAIL and Posco. Depending on the success of the envisaged JV plant at Bokaro, new initiatives at other locations can be considered.
What is your view on sharing of profit from mining operations, as proposed in draft Mining Bill?
SAIL is always committed for uplift of the people in the areas it operates and therefore, any proposal or scheme for improving the life of people, particularly the poor, is welcomed by the company. However, SAIL is basically a steel producing company and its profits are mainly through marketing of steel. Constitution of the company and its operations are such that it is not possible to workout profit or loss separately for the mines as the mining activity is not a separate segment of revenue or profit centre. Besides, the steel companies having captive mines are not allowed to sell ore in the open market. So, whatever modalities for compensation are finalised, these need to be practical and implementable. I believe that to ensure a smoother implementation of the provisions of the draft legislation, there is an immediate need for consensus building among stakeholders.
'Indian cos are also sources of investment'
ASDAQ OMX, which owns and operates NASDAQ and seven European stock exchanges, is cautiously watching India's emergence as an economic superpower. Eric D Landheer , head of Asia pacific, NASDAQ OMX, says Indian companies with global ambitions could benefit from the visibility offered by a NASDAQ listing . Excerpts from an interview with ET:
How do you view India?
India is a tremendous growth story. It is truly one of the rising stars of the global economy. India and China are seen as the best investment opportunities in the near- to mid-term. On a larger scale, I would look at the BIC countries, keeping Russia outside (BRIC), as I believe it is not at the same stage as the others. For India, we can bank on the burgeoning middle class, as a long-term trend to take the economy forward. There are some fantastic companies in India and there has been a sea change in how Indian and Chinese markets are viewed. They no longer remain investment destinations, but are also seen as sources of investment.
What about the competition between China and India?
India and China have tremendous appetite for growth. Going forward I would see them competing in the M&A sphere and also for resources.
Why should Indian companies go in for US listing?
The answer lies in whether the company is looking at a global model or a domestic model for growth. A company wanting to achieve global visibility would like to list abroad. Listing in the US is not an 'either or' situation. An Indian firm listed in India can list in the US through ADRs.
Why did makemytrip.com go to the American market for IPO?
Makemytrip.com started out with a model, which is based on providing traveling solutions for expats. There was a similar listing some years ago of a Chinese firm with a similar business model. It was highly successful and that could have probably made Makemytrip aware of the possibility. The success of the Makemytrip IPO showed that US investors have substantial appetite for the India growth story.
Your views on outsourcing?
The reality is that the US is not doing well in terms of its recovery and there is a fair amount of politicizing of economic issues. My personal view is that protectionism is not good for anyone, and labour and capital will always flow to the lowest cost base. There will be some pressure from jobless people, but this process will continue. Question is, is this process sustainable? I believe it can be looked as a medium-term growth model. As the economy continues to grow the wage pressures would increase and the next viable outsourcing destination will be sought.
What are the requirements for NASDAQ listing?
The company has to be either US GAAP or IFRS compliant. They should comply with Sarbanes Oxley Act. The listing requirements are the highest for NASDAQ. We have continuously increased our requirements while our competitors have done the opposite.
Any new indices/products that you are looking to bring to India?
We launched the NASDAQ 100 index in China some time back. It has some of the largest domestic and international non-financial companies listed on The NASDAQ. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies, including investment companies. We are looking at launching this product in India.
What are your views on Indian capital markets?
The Indian capital market has grown very quickly and there are issues of corporate governance, insider trading and embezzlements. Wherever there is growth there will be growing pains. We have had our own share of scandals (Enron). The issue is not with the current form/ number of laws, but rather with enforcement of those laws.
What do you think of the current level of indices in India?
I would be cautiously concerned. I do believe that the markets are a little ahead of themselves.
How do you view India?
India is a tremendous growth story. It is truly one of the rising stars of the global economy. India and China are seen as the best investment opportunities in the near- to mid-term. On a larger scale, I would look at the BIC countries, keeping Russia outside (BRIC), as I believe it is not at the same stage as the others. For India, we can bank on the burgeoning middle class, as a long-term trend to take the economy forward. There are some fantastic companies in India and there has been a sea change in how Indian and Chinese markets are viewed. They no longer remain investment destinations, but are also seen as sources of investment.
What about the competition between China and India?
India and China have tremendous appetite for growth. Going forward I would see them competing in the M&A sphere and also for resources.
Why should Indian companies go in for US listing?
The answer lies in whether the company is looking at a global model or a domestic model for growth. A company wanting to achieve global visibility would like to list abroad. Listing in the US is not an 'either or' situation. An Indian firm listed in India can list in the US through ADRs.
Why did makemytrip.com go to the American market for IPO?
Makemytrip.com started out with a model, which is based on providing traveling solutions for expats. There was a similar listing some years ago of a Chinese firm with a similar business model. It was highly successful and that could have probably made Makemytrip aware of the possibility. The success of the Makemytrip IPO showed that US investors have substantial appetite for the India growth story.
Your views on outsourcing?
The reality is that the US is not doing well in terms of its recovery and there is a fair amount of politicizing of economic issues. My personal view is that protectionism is not good for anyone, and labour and capital will always flow to the lowest cost base. There will be some pressure from jobless people, but this process will continue. Question is, is this process sustainable? I believe it can be looked as a medium-term growth model. As the economy continues to grow the wage pressures would increase and the next viable outsourcing destination will be sought.
What are the requirements for NASDAQ listing?
The company has to be either US GAAP or IFRS compliant. They should comply with Sarbanes Oxley Act. The listing requirements are the highest for NASDAQ. We have continuously increased our requirements while our competitors have done the opposite.
Any new indices/products that you are looking to bring to India?
We launched the NASDAQ 100 index in China some time back. It has some of the largest domestic and international non-financial companies listed on The NASDAQ. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies, including investment companies. We are looking at launching this product in India.
What are your views on Indian capital markets?
The Indian capital market has grown very quickly and there are issues of corporate governance, insider trading and embezzlements. Wherever there is growth there will be growing pains. We have had our own share of scandals (Enron). The issue is not with the current form/ number of laws, but rather with enforcement of those laws.
What do you think of the current level of indices in India?
I would be cautiously concerned. I do believe that the markets are a little ahead of themselves.
We want to showcase cream of Oz culture
Peter Varghese took over as Australian High Commissioner to India in August 2009. He is a career officer of Australia’s department of foreign affairs and trade, which he joined in 1979. ET caught up wih him in Kolkata. Excerpts:
Tell us Australia’s plans on the cultural front with India?
Both countries need to know a lot more about each other, because the image we have is dated. Australians are still to get a full picture of modern India, especially its economic dynamism. Equally, many Indians would probably like to get a better idea of what Australia is all about, particularly its multi-culturalism.
So, what are you charting out to provide a better insight into Australian culture and bring the two countries closer in this sphere?
We want to bring some of the cream of Australian culture. For instance, a modern dance company, an exhibition of aboriginal art, Australian writers and musicians, including jazz artistes. In the same breath, we would also like to take out to Australia, Indian journalists and leaders in the Indian cultural community to help them get a glimpse of modern Australia. This cultural programme will unfold in 2012 when India will the focus of Australia. The entire event will spread over a period of 12 months in the calender year.
Have you already begun initiating some cultural projects in India?
Yes, we have. We have recently had an Australian film fest in Mumbai, Chennai and New Delhi. We have also had a tour by two classical musicians, the Gregorian Brothers and by the Didgeridoo musicians. A photographic exhibition was also fielded, titled, All of Us, a compilation of photos of multicultural faces in Australia, showing people living in Australia from all parts of the world. In Kolkata, we have had a heritage project running between Australia and India. It revolves around sharing our expertise on the preservation of heritage buildings in Calcutta.
Does the arts sphere draw funding support in Australia?
The Australia Council is the umbrella arts funding organisation in Australia. It extends financial support for the arts across the board, including major museums and galleries.
Tell us Australia’s plans on the cultural front with India?
Both countries need to know a lot more about each other, because the image we have is dated. Australians are still to get a full picture of modern India, especially its economic dynamism. Equally, many Indians would probably like to get a better idea of what Australia is all about, particularly its multi-culturalism.
So, what are you charting out to provide a better insight into Australian culture and bring the two countries closer in this sphere?
We want to bring some of the cream of Australian culture. For instance, a modern dance company, an exhibition of aboriginal art, Australian writers and musicians, including jazz artistes. In the same breath, we would also like to take out to Australia, Indian journalists and leaders in the Indian cultural community to help them get a glimpse of modern Australia. This cultural programme will unfold in 2012 when India will the focus of Australia. The entire event will spread over a period of 12 months in the calender year.
Have you already begun initiating some cultural projects in India?
Yes, we have. We have recently had an Australian film fest in Mumbai, Chennai and New Delhi. We have also had a tour by two classical musicians, the Gregorian Brothers and by the Didgeridoo musicians. A photographic exhibition was also fielded, titled, All of Us, a compilation of photos of multicultural faces in Australia, showing people living in Australia from all parts of the world. In Kolkata, we have had a heritage project running between Australia and India. It revolves around sharing our expertise on the preservation of heritage buildings in Calcutta.
Does the arts sphere draw funding support in Australia?
The Australia Council is the umbrella arts funding organisation in Australia. It extends financial support for the arts across the board, including major museums and galleries.
Part of recovery will come from opening up: WTO deputy DG
The Doha round of trade negotiations, estimated to result in additional $270 billion of trade annually, is nowhere near conclusion even after nine years of its launch. WTO deputy director general Alejandro Jara talks about the state of negotiations and what lies ahead for world trade . Excerpts of an interview with ET.
There has not been any negotiation between trade ministers at the WTO ever since they failed to reach a breakthrough in July 2008 in Geneva. Is interest in the round waning?
It is true that in Geneva we failed to achieve a breakthrough in the key issues of agriculture and Nama (industrial goods). Since then we did a lot of work in terms of better defining different options that are available and looking for consensus. This work has been very productive from a technical point of view and there has been constant progress. We expect that some time in the future there would again be conditions for ministers to meet and take political decisions to make progress in negotiations.
It has not been possible so far as there have been elections, frustrations and many other factors that make political conditions difficult. We are trying to facilitate (proper conditions). Perhaps we are going to find some time next year for ministers to meet. Also, it is not that the WTO is paralysed. All trade ministers did meet in Geneva last December, not to negotiate, but for a normal meeting.
Elections keep on happening. First there was the US Presidential elections and now we have the Congressional elections. How do you find the perfect time to push through a deal?
There is never an ideal or perfect time. There is always political interference because of elections. However, if one of the major stakeholders is changing governments, you have to give them time to take over responsibilities and take positions to allow them to sit with you on the table.
Do you think the global economic crisis in the last couple of years had any bearing on Doha negotiations?
The downturn has shown a couple of things. It exhibited the value of the WTO and the value of rules (in world trade). One has to appreciate that countries have not closed markets in the face of crisis and unemployment. It is clear that part of the recovery will come from opening up and through discipline. The easiest stimulus package that the government can now give is to conclude the Doha round as early as possible. It will open up new business opportunities and enhance trade.
With the US making statements on how emerging economies like India and China need to give more market access for the Doha round to progress, has there actually been any progress in the Nama negotiations?
I think we made progress because in July 2008 it was not possible to come up with a package at all. The US had then said that what was on the table was not enough. It is taking time, but privately and bilaterally they are meeting other countries and saying we want more in some particular areas. Also, if you want more, you have to give more. So we have a negotiation going on and we are doing fine.
There has not been any negotiation between trade ministers at the WTO ever since they failed to reach a breakthrough in July 2008 in Geneva. Is interest in the round waning?
It is true that in Geneva we failed to achieve a breakthrough in the key issues of agriculture and Nama (industrial goods). Since then we did a lot of work in terms of better defining different options that are available and looking for consensus. This work has been very productive from a technical point of view and there has been constant progress. We expect that some time in the future there would again be conditions for ministers to meet and take political decisions to make progress in negotiations.
It has not been possible so far as there have been elections, frustrations and many other factors that make political conditions difficult. We are trying to facilitate (proper conditions). Perhaps we are going to find some time next year for ministers to meet. Also, it is not that the WTO is paralysed. All trade ministers did meet in Geneva last December, not to negotiate, but for a normal meeting.
Elections keep on happening. First there was the US Presidential elections and now we have the Congressional elections. How do you find the perfect time to push through a deal?
There is never an ideal or perfect time. There is always political interference because of elections. However, if one of the major stakeholders is changing governments, you have to give them time to take over responsibilities and take positions to allow them to sit with you on the table.
Do you think the global economic crisis in the last couple of years had any bearing on Doha negotiations?
The downturn has shown a couple of things. It exhibited the value of the WTO and the value of rules (in world trade). One has to appreciate that countries have not closed markets in the face of crisis and unemployment. It is clear that part of the recovery will come from opening up and through discipline. The easiest stimulus package that the government can now give is to conclude the Doha round as early as possible. It will open up new business opportunities and enhance trade.
With the US making statements on how emerging economies like India and China need to give more market access for the Doha round to progress, has there actually been any progress in the Nama negotiations?
I think we made progress because in July 2008 it was not possible to come up with a package at all. The US had then said that what was on the table was not enough. It is taking time, but privately and bilaterally they are meeting other countries and saying we want more in some particular areas. Also, if you want more, you have to give more. So we have a negotiation going on and we are doing fine.
Cooperation, but via bully or plea?
Cooperation can happen only between equals. Between unequals, it's either bully or plea behind the facade of cooperation. This was evident during the Bretton Woods agreement; during the German unification; and today, in the G20 appeal for cooperation against currency war. As all economies suffer in racing their currency values to the bottom and attempts for cooperation fail, the new economic growth model may be inward-looking rather than outward-looking. This article focuses on how it is difficult for countries to cooperate for others' benefit while themselves mitigating crises; and how economies should avoid aggressive export-pushing and try becoming self-sufficient, the theory of comparative advantage notwithstanding.
In Bretton Woods agreement (1944) the US pledged to redeem $35 for one ounce of gold; ran expansionary monetary policy, inflation leading to overvaluation of the dollar. When the US, the world’s biggest economy, asked various central banks to cooperate by buying and keeping dollar reserves, it was more bullying, which got further endorsed by the rude refusal by President Nixon in 1971 to honour the promised dollar rate. Today, when the US seeks cooperation from China and others to maintain their trillions of dollars’ forex reserves in US T-bills, it’s more of a plea to finance its mammoth double deficit. Tomorrow, if double-dip becomes a reality, will America overcome it again by creating a war somewhere? Hope not.
After German unification (1990), West Germany got overheated while reconstructing East Germany and raised interest rates to rein in inflation. But since their trading partners were facing recession, yet also had to defend their currencies fixed against the Deutschmark, they pleaded the Bundesbank not to tighten. When the strongest eurozone economy, Germany, sought cooperation from European countries, it really was ‘bullying’. Today, during the European debt crisis and Germany itself probably needing a bailout later, Berlin’s call for cooperation by a stringent measure to reduce deficits is a plea, lest the euro should fall apart.
The Bank of Japan has started (2010) suppressing the yen to aid exports and adapted the popular managed float. America and other advanced nations that did not earlier intervene, are also devaluing their currencies to keep jobs from going to the emerging economies via BPOs and for export advantage. China, India and other emerging economies anyway have undervalued currencies vis-à-vis their PPP levels. Thus, if all countries race their currency values to the bottom, it will be a zero-sum game with no winners. In the process, inflation would climb higher while sterilisation will load net loss on every dollar of forex reserves held in US bonds. SDRs could then probably replace the dollar as global reserve currency.
To arrest this currency war , G20 countries are seeking global cooperation. The question is, why would countries themselves facing crisis cooperate for betterment of others? For instance, why should China keep holding US T-bills and finance the US deficit? Why should Japan let the yen appreciate while letting its exporters suffer? Why should India let rupee appreciate and lose huge employment in its IT sector? Why should the European Central Bank bail out its debt-ridden countries while exhausting all its resources and letting euro fall apart? For that matter, how long and why should the US keep its dollar on free float and overvalued when its own unemployment rate is close to 10%? All the answers, ironically, seem to support the logic of a currency war.
In Bretton Woods agreement (1944) the US pledged to redeem $35 for one ounce of gold; ran expansionary monetary policy, inflation leading to overvaluation of the dollar. When the US, the world’s biggest economy, asked various central banks to cooperate by buying and keeping dollar reserves, it was more bullying, which got further endorsed by the rude refusal by President Nixon in 1971 to honour the promised dollar rate. Today, when the US seeks cooperation from China and others to maintain their trillions of dollars’ forex reserves in US T-bills, it’s more of a plea to finance its mammoth double deficit. Tomorrow, if double-dip becomes a reality, will America overcome it again by creating a war somewhere? Hope not.
After German unification (1990), West Germany got overheated while reconstructing East Germany and raised interest rates to rein in inflation. But since their trading partners were facing recession, yet also had to defend their currencies fixed against the Deutschmark, they pleaded the Bundesbank not to tighten. When the strongest eurozone economy, Germany, sought cooperation from European countries, it really was ‘bullying’. Today, during the European debt crisis and Germany itself probably needing a bailout later, Berlin’s call for cooperation by a stringent measure to reduce deficits is a plea, lest the euro should fall apart.
The Bank of Japan has started (2010) suppressing the yen to aid exports and adapted the popular managed float. America and other advanced nations that did not earlier intervene, are also devaluing their currencies to keep jobs from going to the emerging economies via BPOs and for export advantage. China, India and other emerging economies anyway have undervalued currencies vis-à-vis their PPP levels. Thus, if all countries race their currency values to the bottom, it will be a zero-sum game with no winners. In the process, inflation would climb higher while sterilisation will load net loss on every dollar of forex reserves held in US bonds. SDRs could then probably replace the dollar as global reserve currency.
To arrest this currency war , G20 countries are seeking global cooperation. The question is, why would countries themselves facing crisis cooperate for betterment of others? For instance, why should China keep holding US T-bills and finance the US deficit? Why should Japan let the yen appreciate while letting its exporters suffer? Why should India let rupee appreciate and lose huge employment in its IT sector? Why should the European Central Bank bail out its debt-ridden countries while exhausting all its resources and letting euro fall apart? For that matter, how long and why should the US keep its dollar on free float and overvalued when its own unemployment rate is close to 10%? All the answers, ironically, seem to support the logic of a currency war.
We see more currency appreciation: David Carbon, DBS
In an interview with ET Now, David Carbon , Head of Economics and Currency Research, DBS , talks about China’s rate hike, asset bubble, inflation and currency .Excerpts :
China has raised the interest rates for the first time after 3 years. How much do you expect this to cool the economy? Do you think that this was a step in the right direction?
It absolutely was a step in a right direction. I think a couple of months back everybody was talking about the China slowdown. We are looking too closely at the supply side and the manufacturing sector PMI and so on. Our view has always been that if you look at the demand side of the Chinese economy, the growth is very-very strong, whether you are looking at consumption or investment figures or the loan growth figures, everything is very-very strong. So this is a long overdo rate hike.
In our view, there will be more currency appreciation moving forward. We think we will gather pace and that will be part of the monetary tightening as well. Basically everybody across Asia is a little bit still, a little bit behind the curve in terms of getting monetary policy back to normal and China is perhaps the country which is the farthest behind the curve. So we have got a fair amount, a more tightening to go from the Chinese.
Do you sense an asset bubble, a real estate bubble out there? The talk is getting more headwind again.
No, I do not think so. I mean we have got small pockets in all the countries in Asia, not just China. We were looking at little pockets in Korea, Taiwan, Singapore, Hong Kong, and India. You name at their little property pockets where authorities need to keep an eye on things, but we are at the start here of a long period of a strong growth and a long period of capital inflows and so on. And basically we were at very early days here. So we are quite optimistic about the outlook.
What about the growth numbers and the inflation figures that came out for China? What do you think it would be the long term ramifications of where the region is headed and how these rate hikes would impact growth?
Well, we were looking for multiyear period in Aisa here in the next 3-4-5 years of above average growth and this is remarkable in the sense that the Asian growth is going to be above average growth and the G3, the US, Europe, Japan and so on is going to be a little bit below average, not terribly. So in our view somewhat below average for the G3 and above average for Asia.
Much of this is coming out of the fact that Asia is now driving its own growth and putting a stronger, a bigger weight on the Asian foot and we are also getting a lot of capital inflows into the region. It is going to be driving stronger growth in the region as we move forward. So every country in the region, whether it is China or Thailand or Korea or India, is going to be dealing with how do we tight the monetary conditions when we have a lot of capital inflows into the region and growth is picking up. It is going to b
China has raised the interest rates for the first time after 3 years. How much do you expect this to cool the economy? Do you think that this was a step in the right direction?
It absolutely was a step in a right direction. I think a couple of months back everybody was talking about the China slowdown. We are looking too closely at the supply side and the manufacturing sector PMI and so on. Our view has always been that if you look at the demand side of the Chinese economy, the growth is very-very strong, whether you are looking at consumption or investment figures or the loan growth figures, everything is very-very strong. So this is a long overdo rate hike.
In our view, there will be more currency appreciation moving forward. We think we will gather pace and that will be part of the monetary tightening as well. Basically everybody across Asia is a little bit still, a little bit behind the curve in terms of getting monetary policy back to normal and China is perhaps the country which is the farthest behind the curve. So we have got a fair amount, a more tightening to go from the Chinese.
Do you sense an asset bubble, a real estate bubble out there? The talk is getting more headwind again.
No, I do not think so. I mean we have got small pockets in all the countries in Asia, not just China. We were looking at little pockets in Korea, Taiwan, Singapore, Hong Kong, and India. You name at their little property pockets where authorities need to keep an eye on things, but we are at the start here of a long period of a strong growth and a long period of capital inflows and so on. And basically we were at very early days here. So we are quite optimistic about the outlook.
What about the growth numbers and the inflation figures that came out for China? What do you think it would be the long term ramifications of where the region is headed and how these rate hikes would impact growth?
Well, we were looking for multiyear period in Aisa here in the next 3-4-5 years of above average growth and this is remarkable in the sense that the Asian growth is going to be above average growth and the G3, the US, Europe, Japan and so on is going to be a little bit below average, not terribly. So in our view somewhat below average for the G3 and above average for Asia.
Much of this is coming out of the fact that Asia is now driving its own growth and putting a stronger, a bigger weight on the Asian foot and we are also getting a lot of capital inflows into the region. It is going to be driving stronger growth in the region as we move forward. So every country in the region, whether it is China or Thailand or Korea or India, is going to be dealing with how do we tight the monetary conditions when we have a lot of capital inflows into the region and growth is picking up. It is going to b
Signed 8 deals, 11 in pipeline: N Chandrasekaran, CEO, TC
ET Now caught up with N Chandrasekaran , Chief Executive Officer and Managing Director, Tata Consultancy Services , for his views on the deals bagged by the company, margins and hiring targets. Excerpts:
While you have seen excellent top line growth this time around, what are some of the large deals that you bagged this quarter and are there in the pipeline?
This quarter has seen a tremendous demand recovery and we have been able to catch up that and then executed very well. From a deal perspective, we have signed 8 large deals in the quarter -- two in the BFSI sector, two in the retail sector, one each in life science, insurance, media and the government sector. In terms of a pipeline, we are pursuing about 11 large deals across markets, across industries - a good pipeline indeed.
It is not just the US which has done well, but even continental Europe has contributed, and India is doing fairly well as well. You mentioned about broad-based growth across verticals. Would this also be across geographies for the next one or two quarters? Do you think almost all the geographies would contribute?
It is very difficult to tell about the next quarter. But this quarter we have seen growth across markets like the US, UK, continental Europe, India, and Asia Pacific - all of them have registered double digit growth. So the demand has been broad based both in terms of industries and also in terms of the geography markets. But the pipeline is healthy across markets and across industries. So I think the recovery will continue, but usually that quarter is a soft quarter with a number of working days being less. Also, some of the manufacturing and high tech companies go slow this quarter. So it is very difficult to say what the demand and the growth trend will look like in the Q3, but the environment out there is quite promising.
Are you worried at all with the kind of hiring target that you have set out for yourself - 50000, addition of 20000 - for the next two quarters?
The hiring target is based on the current rate of attrition and the future demands. In view of that, we have increased it by another 10000 from the target of 40000 we gave last quarter to 50000. So we are going to be recruiting more people, but obviously there are a few things that we need to worry about. I would like attrition to come down. I think 14% is quite a large number on our base. I would like to bring it down. Currency is a concern, rupee is appreciating and in the last few weeks it has gone by 6%. So that is a worry definitely.
Then, there is the regulatory environment. Any measure that may be taken in different markets is a concern that we need to worry about and obviously the macro environment is something that we need to watch out for. So these are the 3 or 4 concerns and worries.
While you have seen excellent top line growth this time around, what are some of the large deals that you bagged this quarter and are there in the pipeline?
This quarter has seen a tremendous demand recovery and we have been able to catch up that and then executed very well. From a deal perspective, we have signed 8 large deals in the quarter -- two in the BFSI sector, two in the retail sector, one each in life science, insurance, media and the government sector. In terms of a pipeline, we are pursuing about 11 large deals across markets, across industries - a good pipeline indeed.
It is not just the US which has done well, but even continental Europe has contributed, and India is doing fairly well as well. You mentioned about broad-based growth across verticals. Would this also be across geographies for the next one or two quarters? Do you think almost all the geographies would contribute?
It is very difficult to tell about the next quarter. But this quarter we have seen growth across markets like the US, UK, continental Europe, India, and Asia Pacific - all of them have registered double digit growth. So the demand has been broad based both in terms of industries and also in terms of the geography markets. But the pipeline is healthy across markets and across industries. So I think the recovery will continue, but usually that quarter is a soft quarter with a number of working days being less. Also, some of the manufacturing and high tech companies go slow this quarter. So it is very difficult to say what the demand and the growth trend will look like in the Q3, but the environment out there is quite promising.
Are you worried at all with the kind of hiring target that you have set out for yourself - 50000, addition of 20000 - for the next two quarters?
The hiring target is based on the current rate of attrition and the future demands. In view of that, we have increased it by another 10000 from the target of 40000 we gave last quarter to 50000. So we are going to be recruiting more people, but obviously there are a few things that we need to worry about. I would like attrition to come down. I think 14% is quite a large number on our base. I would like to bring it down. Currency is a concern, rupee is appreciating and in the last few weeks it has gone by 6%. So that is a worry definitely.
Then, there is the regulatory environment. Any measure that may be taken in different markets is a concern that we need to worry about and obviously the macro environment is something that we need to watch out for. So these are the 3 or 4 concerns and worries.
India on the verge of double digit growth: KV Kamath
ET Now caught up with KV Kamath , Chairman, ICICI Bank , for his views on a number of issues, including economic growth and its impact on job prospects in the country, equity markets, and giving foreign banks greater access into the country, among others. Excerpts:
Now as the growth is firmly back on track and you constantly engage with regulators, investors, other banks and corporates, what is the sense you get? Would you say that we are finally at a stage where we can prepare ourselves or rather confidently say that we are on the verge of double digit growth?
I think we clearly are on the verge of a double digit growth. There is a huge level of optimism around business in many sectors. Whether it is manufacturing, infrastructure or any other sector, there is a huge level of optimism.
On the one hand you have the economy at present going at a little over 8% and on the other hand you have the jobs market growing at just about 4%. Would you worry that somewhere the corporate sector or rather industry at large is going to face human resources crunch and again what do you believe the impact of this on the corporate sector?
My view is that we are probably growing well over 10% at this point of time. If we add what I call the uncounted and the unaccounted growth to the base figure, the base figure of 9% and you add whatever number you want 2% each for uncounted and 2 for unaccounted, you are well into double digits. But I do not want to debate the point. Clearly this sort of growth will need a huge amount of human resource in business and that to run this economy at this pace. Luckily for us where we are in terms of young people coming into the job market, we will have anything between 10 and 15 million youngsters ready to come into the marketplace and I think that is the potential that we need to see and absorptive capacity for the economy growing at double digits. I think clearly there is the ability to produce that many young talented people for industry, and on the part of the industry to actually have them come in and do what they are supposed to do.
But at the same time over the last 6 years if you just look at the average wages of the Indian worker, they have gone up by roughly 100 to 150%. So obviously there is some sort of a resource crunch. It is pointing to some sort of a pressure on the books of organisations in terms of their wage costs?
Two things are happening. You called it absolutely right. The wage increase that is happening is I think because of a mismatch of skill sets. There is a large workforce ready there, but the skill sets that a particular business requires is or could be in short supply and that is why you are waging less. Secondly, I think it is also a resetting of the base level itself in terms of wages or compensation in a rapidly-expanding country. The challenge then is really to prepare people with the right skill sets and that I think is the next thing that will be addressed by both government and industry.
Now as the growth is firmly back on track and you constantly engage with regulators, investors, other banks and corporates, what is the sense you get? Would you say that we are finally at a stage where we can prepare ourselves or rather confidently say that we are on the verge of double digit growth?
I think we clearly are on the verge of a double digit growth. There is a huge level of optimism around business in many sectors. Whether it is manufacturing, infrastructure or any other sector, there is a huge level of optimism.
On the one hand you have the economy at present going at a little over 8% and on the other hand you have the jobs market growing at just about 4%. Would you worry that somewhere the corporate sector or rather industry at large is going to face human resources crunch and again what do you believe the impact of this on the corporate sector?
My view is that we are probably growing well over 10% at this point of time. If we add what I call the uncounted and the unaccounted growth to the base figure, the base figure of 9% and you add whatever number you want 2% each for uncounted and 2 for unaccounted, you are well into double digits. But I do not want to debate the point. Clearly this sort of growth will need a huge amount of human resource in business and that to run this economy at this pace. Luckily for us where we are in terms of young people coming into the job market, we will have anything between 10 and 15 million youngsters ready to come into the marketplace and I think that is the potential that we need to see and absorptive capacity for the economy growing at double digits. I think clearly there is the ability to produce that many young talented people for industry, and on the part of the industry to actually have them come in and do what they are supposed to do.
But at the same time over the last 6 years if you just look at the average wages of the Indian worker, they have gone up by roughly 100 to 150%. So obviously there is some sort of a resource crunch. It is pointing to some sort of a pressure on the books of organisations in terms of their wage costs?
Two things are happening. You called it absolutely right. The wage increase that is happening is I think because of a mismatch of skill sets. There is a large workforce ready there, but the skill sets that a particular business requires is or could be in short supply and that is why you are waging less. Secondly, I think it is also a resetting of the base level itself in terms of wages or compensation in a rapidly-expanding country. The challenge then is really to prepare people with the right skill sets and that I think is the next thing that will be addressed by both government and industry.
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