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Wipro buys US capital markets software provider Viteos for $130 million
Bengaluru:MMNN:23 Dec. 2015
Wipro Ltd has agreed to buy a business process outsourcing (BPO) technology platform provider for capital markets, Viteos Group, for $130 million. The move comes as the Indian company presses the pedal in its efforts to bolster its portfolio of high-margin software platforms.
The 12-year old US company offers an array of solutions including processing, reconciliation of trade, settlements, customer data, among others, across various asset classes and currencies for investment banking clients in the US, Europe and Asia.
“The IT services industry is moving to an ‘as-a-service’ model, and the future of business process services is going to be business process as-a-service,” said Shaji Farooq, president and chief executive of finance solutions at Wipro.
“Our strategy is to invest in industry vertical platforms which will provide platform-based services to our clients in transaction or outcome-based pricing models. Viteos will further our strategy in the capital markets domain,” Farooq said.
Wipro, India’s third largest software exporter, already offers many of these solutions to its clients on the sell side of capital markets. They, in turn, sell investment services to asset management companies.
Wipro plans to leverage Viteos’ licensing platform to launch solutions across other segments of capital markets, including mutual funds, pension funds and insurance firms that buy large portions of securities for money-management purposes.
The New Jersey-based company, which earned $26.5 million in revenue in the last fiscal year that ended in March 2015 with roughly 400 employees, will retain its brand identity to further strengthen its presence among existing clients and expand its offerings into the larger asset management industry with the Indian company’s backing.
Wipro will also retain the US company’s leadership team to drive the platform-based outsourcing business services.
The acquisition reflects a broader shift in India’s software outsourcing industry towards building an arsenal of intellectual property-led high-margin software platforms rather than relying on an army of engineers to offer technology solutions to clients.
Wipro’s larger competitors such as Infosys Ltd, that has in the past been coy about making acquisitions, has joined the fray to acquire new technologies to build a portfolio of high-margin software platforms.
In 2015, Infosys bought three companies—Panaya, an automation software firm, Skava, a mobile commerce platform and Noah Consulting, a consulting provider for the energy and utilities segment.
Wipro has also not shied away from acquisitions in the past, having spent more than $1 billion in the last 10 years to acquire companies as part of its “string of pearls” strategy. Earlier this year, it bought a Denmark-based technology design specialist Designit for $95 million to strengthen its digital technologies solutions.
These companies have also been investing heavily in start-up companies to build new-age technology solutions for clients.
Asia Stocks Rise on China Surge, Oil Plunges to 11-Year Low
MMNN:21 Dec. 2015
Chinese shares led Asian markets higher on Monday, defying a dive on Wall Street, while the price of Brent crude plumbed 11-year lows on renewed worries over a global oil glut.
European shares are unlikely to follow Asia's example, with spreadbetters expecting Britain's FTSE 100 and France's CAC40 to open down about 0.6 percent, and Germany's DAX to start the day 0.5 percent lower.
Brent crude futures slumped as low as $36.17 a barrel, the lowest since 2004 as production around the world remained at or near record highs, and a strong dollar following last week's US rate increases weighed on demand.
They were 1.3 percent lower at $36.41 as of 0620 GMT while US crude slid 24 cents to $34.49 a barrel, close to Friday's 2015 lows.
Amid thin trading in a holiday-heavy week, MSCI's broadest index of Asia-Pacific shares outside Japan extended gains to 0.3 percent, as investors bid up modestly priced Chinese blue-chips.
China's CSI300 index surged 2.9 percent and the Shanghai Composite jumped 2 percent. Hong Kong's Hang Seng rode the Chinese market's coattails to climb 0.4 percent.
"As we head into the final two weeks of the year, the limited year-end liquidity will be something to keep a watch on," Bernard Aw, market strategist at IG in Singapore, wrote in a note.
"Today, we have not much in the way of market-moving data for Asia, so market players will likely be sitting on the sidelines and trying to search for clarity."
Australia's main index ended the day little changed. Japan's Nikkei extended losses from Friday to close down 0.4 percent.
The market took a hit late Friday after the Bank of Japan announced some changes to its massive stimulus programme but stopped short of expanding the net amount of assets it buys, disappointing some who had hoped for a more aggressive move.
That in turn sent the yen broadly higher and caused some wild swings against the dollar. The dollar was down at 121.32 yen after touching 123.58 on Friday.
The dollar slipped 0.1 percent to 98.619 against a basket of currencies amid very light trade, and the euro rose 0.1 percent to $1.0877 .
Wall Street also had a volatile end to the week with the expiration of stock and index options contracts generating heavy trading volume.
The Dow ended Friday down 2.1 percent, while the S&P 500 lost 1.78 percent and the Nasdaq 1.59 percent. For the week, the Dow fell 0.8 percent, the S&P 500 0.3 percent and the Nasdaq 0.2 percent.
The flight from stocks was a boon for safe-haven bonds. Longer-dated Treasuries have been particularly popular as investors wager the Federal Reserve is well ahead of the curve on inflation after last week's rate hike.
Gold also benefited from the weakness in equity markets. The metal retained sharp gains from the previous trading session, recouping some losses from last week's US interest rate hike.
Spot gold climbed to 1,069.26, building on the 1.4 percent gain seen in the previous session.
Other commodities however didn't fare as well. London copper edged back as weak demand outweighed news that China's smelters are considering deeper production cuts.
Three-month copper was steady at $4,682.50 a tonne, hovering near the 6 1/2 year lows seen in November.
The global background is one of disinflation given the weakness in oil and other commodity prices and the mounting spare capacity in major exporters such as China.
Inflation expectations for five years ahead have taken a marked turn lower this month, dropping to 2.11 percent from a high of 2.24 percent.
The resulting rally in longer-dated Treasuries has flattened the yield curve with the gap between two-year and 10-year paper shrinking to 123 basis points, the smallest since early February.
A flatter curve is bad news for bank profits since they essentially make money from borrowing short and lending long, and could be one reason U.S. bank stocks fell hard late last week.
Financial stocks were the worst-performing S&P sector on Friday.
Govt revises FY16 growth forecast downward to 7-7.5% vs 8.1-8.5% earlier
MMNN:18 Dec. 2015
The government on Friday lowered its growth forecast for the fiscal year ending in March 2016 to 7-7.5 percent from 8.1-8.5 percent estimated in February.
The revision came after Asia's third-largest economy grew 7.2 percent in the first half of the 2015/16 fiscal year.
In its mid-year economic review presented in parliament, the finance ministry said though the economy has made considerable progress, yet challenges remain.
Further, the report also reiterated it would meet its fiscal deficit target of 3.9 percent and revenue deficit target of 2.8 percent for this year.
But in a statement that may raise some economists' eyebrows, it said there may be a need to reconsider next year's fiscal deficit target (3.5 percent).
Speaking during the mid-year economic review, Arvind Subramanian, chief economic advisor, said, "Economy has maid considerable progress but challenges remain. The government aims to meet fiscal deficit target of 3.9% withough big expenditure cuts," adding that capital expenditure has gone up by 0.5%.
He also said the economy is well cushioned to deal with any volatility owing to fed rate hike.
The government's decision to lower the growth forecast today came after the Reserve Bank of India (RBI) in September had already trimmed its growth projection to 7.4 percent from its earlier expectations of 7.6 percent.
“Overall, lead/coincident indicators, the forward looking surveys and estimates from model-based forecasts warrant a downward revision of Gross Value Added (GVA) growth to 7.4 per cent in FY16 from the projection given in the April Monetary Policy Report (MPR),” RBI said in its Monetary Policy Report.
In October, the International Monetary Fund (IMF) also lowered India's growth forecast to 7.3 percent for the current fiscal from 7.5 percent predicted in July.
In the same month, India Ratings scaled down its GDP growth forecast for this fiscal by 20 basis points to 7.5 percent, citing lower agriculture output due to deficient rainfall. The rating agency had earlier forecast a GDP growth of 7.7 percent.
"The downward revision in forecast is primarily due to the lower agricultural growth following the deficient rainfall in many parts of the country," a report said quoting India Ratings chief economist DK Pant.
Also, global rating agency Fitch in July had pared the country's growth forecast for the current fiscal to 7.8 percent from 8 percent predicted earlier.
“Capital expenditure has not yet picked up, rural and export demand is weak, and the translation of the monetary policy loosening into lower bank lending rates is limited,” the agency said in a report. “Downside risks to growth relate, for instance, to below-average rainfall during this year’s monsoon season, although the first three weeks of June recorded 16% above-average rainfall,” Fitch said in its report.
Arun Jaitley Explains Why Petrol, Diesel Prices Are Not Falling Fast Enough
MMNN:16 Dec. 2015
Finance Minister Arun Jaitley on Wednesday explained the rationale for not passing the full benefits of the slump in global crude oil prices to domestic consumers. The drop in domestic fuel prices has not kept pace with the slump in global Brent crude oil, which is trading at an 11-year low below $40 per barrel.
Despite multiple price cuts, petrol and diesel prices have remained relatively high because of a series of excise duty hikes imposed by the government
Mr Jaitley today said that 42 per cent of the excise duty collected from selling fuel goes to the states, while the remaining portion goes towards developmental activities.
"Part (of the fuel cost) is going to developmental activities particularly national highways and rural roads because those who consume petrol and diesel drive vehicle on these roads and must pay for it," the finance minister said in Rajya Sabha.
A substantial part of petrol and diesel costs is on account of value added tax, which goes to states, while the fourth part goes to oil companies that suffer huge losses on purchase of crude from global markets, Mr Jaitley added.
"They (oil companies) buy at $80, by the time they sell, prices becomes $60... At one stage the loss of oil companies was as high as Rs 40,000 crore," he said.
The finance minister said that for the first time in many years the government is likely to meet its fiscal deficit target (3.9 per cent of GDP) without resorting to budgetary cuts.
"This will happen for first time, we will achieve fiscal deficit (target) without fiscal cuts," Mr Jaitley said.
Chennai Floods: TCS Issues Revenue Warning, Shares Fall
MMNN:14 Dec. 2015
Tata Consultancy Services shares fell as much as 2.3 per cent on Monday after the outsourcer said revenues in the December quarter could be lower on account of the recent Chennai floods. Chennai is one of TCS' largest delivery locations comprising over 65,000 employees or nearly 20 per cent of total headcount.
"Other than mission critical activities, the normal business functioning of our facilities in the city had to be halted all week since December 1 due to extreme weather conditions and subsequent flooding... While majority of facilities in Chennai opened for normal business functioning on December 7, attendance rates were lower than normal... This is expected to have a material impact on the company's revenues," said India's biggest outsourcer.
TCS' revenue warning comes in a quarter which is considered soft for outsourcers as business is impacted by Christmas and New Year holidays and furloughs in the key markets of US and Europe.
The five-day disruption in Chennai could lead to a 60 basis points quarter-on-quarter impact on TCS Q3 revenues, Nomura estimated.
"This (Chennai floods) will likely lead to an impact on time and material work at TCS (nearly half of its revenues in our view) and also cause some disruption in fixed price projects in terms of pushing out of timelines," the brokerage said.
Nomura cut its target price on TCS stock from Rs 2,670 to Rs 2,500, citing moderating growth because of Chennai floods, cross currency impact and sluggish demand.
Maybank, which has a buy rating on the stock (target of Rs 2,980), said Chennai floods is "mildly" negative for TCS.
"We expect a volume impact of 1.5 per cent quarter-on-quarter for December quarter calculated on the basis of 65,000 employees and loss of work for five days. For FY16, we estimate the revenue growth to be impacted by 0.4 per cent and earnings per share by 1 per cent," the brokerage said.
New Jersey-based Cognizant, which has its largest office in Chennai with 60,000 people across 11 facilities in the city, has so far not specified the damages on account of Chennai floods.
IT firms are not the only ones to be hit by Chennai floods. The domestic auto industry has taken a production hit of around 15 per cent due to unprecedented rains in Tamil Nadu, said Vishnu Mathur, director general of industry body SIAM.
The area outside Chennai, home to companies such as Ford, Renault-Nissan, Hyundai Motor and TVS Motor, is known as India's Detroit for its concentration of automakers.
The devastating Chennai floods led to hundreds of deaths in India's fifth largest city. The Indian economy suffered a $3 billion loss from severe rainfall and flooding in November and early December, reinsurance broker Aon Benfield said in its monthly report on global catastrophes.
As of 1.50 p.m., TCS shares traded 1 per cent lower at Rs 2,364 as compared to 0.75 per cent rise in the broader IT sub-index on the Bombay Stock Exchange.
Compat quashes competition panel’s Rs. 6,316-cr penalty on cement firms
NEW DELHI:MMNN:11 Dec. 2015
In a major verdict, the Competition Appellate Tribunal today set aside Rs. 6,316.59 crore penalty imposed on 11 cement firms by CCI on cartelisation charges and asked the fair trade regulator to hear the matter afresh.
The tribunal also allowed the cement manufacturers to withdraw the 10 per cent penalty amount already deposited with the CCI (Competition Commission of India), which has been asked to pass a fresh order within three months.
ACC was trading up 0.69 per cent or Rs. 9.15 to Rs. 1,333.35 at 12.50 pm.
Ambuja Cements too was up 0.16 per cent to Rs. 190.05 on the BSE.
The judgment follows appeals filed by the cement firms and their industry body Cement Manufacturers Association against the two CCI orders passed in June—July 2012, wherein the regulator has imposed a cumulative penalty of Rs. 6,316.59 crore on cartelisation charges.
The companies included ACC, Ambuja Cements, Binani Cements, Century Textiles Ltd, India Cements, JK Cements, Lafarge India, Madras Cements, Ultratech, JP Associates and Shree Cements.
The CCI had passed the orders after an investigation into complaints, including from Builders Association of India (BAI) against alleged price cartelisation among cement firms.
The orders were later challenged at Compat, which today ordered that “the impugned order is set aside and the matter is remitted to the Commission (CCI) for fresh adjudication of the issues relating to alleged violation” of the relevant sections of the Competition Act.”
“The appellant shall be entitled to withdraw the amount deposited by them in compliance of the interim order passed by the Tribunal,” Compat ruled.
The companies had earlier deposited 10 per cent of their respective penalty amounts.
Fresh order
In two separate orders passed today, the Compat also said, “The Commission (CCI) shall hear the advocates/representatives of the appellants and BAI and pass fresh order in accordance with law.
“We hope and trust the Commission shall pass fresh order as early as possible but within a period of three months from the date, which may be notified after receipt of this order.”
The Tribunal also said “before parting with this order, we consider it necessary to mention that we have referred to various provisions of the Act (un—amended and amended) and Regulations and analysed the same to emphasise the proceedings held under the Act and the Regulations should be just and fair and in consonance with the principles of natural justice as engrafted in the Act and the Regulations.
“We also feel the time has come for the Commission to evolve a comprehensive protocol and lay down guidelines for conducting investigation/inquiry in consonance with the rules of natural justice.
“It should be realised that much of the appellate litigation would be obviated if a just and fair procedure is adopted for conducting investigation and inquiry and passing of orders under Section 27, 28 and the provisions contained in Chapter VI of the Act.”
These sections relate to the cartelisation and other violations. The CCI’s penalty against cement manufacturers has been one of the biggest imposed so far by the regulator and the Tribunal’s verdict in this case may have repercussions for other cases also where CCI has imposed hefty penalties.
The Compat order said that whether the CCI Chairperson, who did not hear arguments of the learned counsel representing the appellants could become a party to the final order passed by the CCI, was one of the questions which arose in the appeals filed against CCI order of June 20, 2012.
Compat further said the case records showed that after about two months of the presentation made by BAI and the CCI before the Parliamentary Standing Committee in the context of allegation of cartelisation by the manufacturers of cement and manipulation of prices by them, BAI had filed a complaint with CCI on July 26, 2010.
In the complaint, it was alleged that the CMA and 11 cement manufacturers formed a cartel and did not undertake production as per their installed capacity resulting in exorbitant rise in the price of cement. It was also alleged the cement manufacturers had deliberately manipulated the price of cement affecting the public at large.
Consequently, CCI ordered a probe into the matter, which found major cement manufacturers were controlling the cement market in India and were in violation of various provisions of the Competition Act.
GAIL Launches Project for Satellite Monitoring of Pipelines
Hyderabad:MMNN:4 Dec. 2015
To address pipeline safety concerns, state-run energy major GAIL and National Remote Sensing Centre, a unit of ISRO, have launched an innovative surveillance geo-portal called 'Bhuvan-GAIL Portal' for utilising space technology for its pipeline application.
"Despite challenges, GAIL (India) has proved space technology can be used efficiently to monitor the pipeline's Right of Use (RoU).
"GAIL has more than 13,000 kms of pipeline network, wherein monthly monitoring of pipeline RoU is presently done via Helicopter surveys," GAIL said in a statement.
By January 2016, GAIL would begin live satellite monitoring of its pipeline RoU. It is also seeking alternative methods such as advanced Unmanned Aerial Vehicles (UAV) which can be integrated with this system, the company said.
GAIL said it has also developed an innovative mobile application from which pictures of untoward incidents, taken from any mobile phone, can be uploaded instantly on the portal.
A report system integrated with the Bhuvan-GAIL portal can send alerts to relevant executives through SMS and e-mail, regarding the changes noted along the RoU as well as the arrival of any new satellite photos.
To establish the technical feasibility of utilising space technology for its pipeline applications, GAIL began the study with imageries from Indian satellites and later shifted to very high-resolution foreign satellites, the statement added.
Globally, pipeline safety and security is a major issue.
With recent progress in satellite-sensing technology, availability of new high-resolution satellites, object-oriented image analysis etc., there is a possibility to introduce space technology for pipeline monitoring applications, it said.
"GAIL's R&D pilot project on satellite monitoring of pipeline RoU for the 610-kms long Dahej-Vijaipur pipeline is one such effort to keep pace with the technological advancements enabling time and cost-effective solutions."
"The Bhuvan-GAIL portal is operated via manual as well as auto-change analysis options to monitor changes along the natural gas pipeline RoU. Change analysis can be undertaken with this technology within the RoU and outside the RoU up to 1 km of the risk zone," it added.
IDBI Bank Rallies 10% on Buzz of Strategic Stake Sale
MMNN:30 Nov. 2015
Shares of IDBI Bank surged over 10 per cent to Rs 95.1 after Economic Times newspaper quoting sources reported that the government is planning to sell 15 per cent stake in the lender to International Finance Corporation (IFC), a unit of World Bank.
The government currently holds a 76.5 per cent stake in IDBI Bank. The report said that the stake sale in IDBI Bank could be through a fresh issue that will infuse more capital into the lender, a stake sale by the government or a combination of both.
The report further said that the government is looking to lower its stake in IDBI Bank to 49 per cent.
IDBI Bank came into existence, with Parliament passing the IDBI Repeal Act in 2003. In terms of provisions of the Repeal Act, IDBI has been functioning as a bank in addition to its earlier role of a financial institution. Analysts feel that since IDBI Bank is not a nationalised bank, there is some operational freedom for the government as far as stake dilution is concerned.
Finance minister Arun Jaitley had earlier hinted about a change in the characteristics of IDBI Bank where government would have a majority stake, but at the same time maintain an arm's length distance. Citing the example of Axis Bank, he had wondered if IDBI Bank can follow that model.
Including today's gain, shares of IDBI Bank has rallied over 80 per cent from its 52-week lows of Rs 52.30 in August.
The government indirectly controls 29.19 per cent in Axis Bank through the administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), the Life Insurance Corporation and four other public sector general insurance companies.
At 1.47 p.m., IDBI Bank shares were up 9 per cent at 94.25, as compared to a flat Nifty.
For faster growth, PM Modi needs to show Indians more reasons to save
MUMBAI:MMNN:27 Nov. 2015
On paper, India's households have more reason than ever to save. But convincing them that the central bank can keep inflation low is proving difficult, hindering the country's ambitious growth plans.
That raises the stakes for Prime Minister Narendra Modi's government, which wants to channel more savings into investments that can generate both growth and jobs, to boost chances of winning a second term after its landslide victory in 2014.
Real interest rates have been positive for over a year, ending almost a decade of negative rates, during which fast-rising prices ate away at whatever savers earned on deposits, and hardened their preference to hold gold and property.
Now inflation is around record lows and gold and property prices are languishing.
But a lack of confidence that inflation will stay muted, combined with lacklustre income growth, means India's overall savings growth rates are at the weakest level in years, following five years of decline.
"If the government really wants to propel savings in the economy, it would be the best time to roll out more instruments like the tax free bonds...or to increase the investment limit into tax-free provident funds," said Deepti Taneja, a 32-year-old New Delhi college professor.
Making it easier for some 18 million state and local government employees, like Taneja, to save more, the government pay commission, which reviews public sector salaries every few years, has recommended an increase of several billion dollars.
"We hope at least to some extent this money from the pay commission will come as savings into the banking sector and not go towards physical assets," a senior policymaker said.
But, people still want better incentives to make financial investments.
"I am really confused about what will I do with these surplus funds once they start crediting it to my salary, because most of the financial instruments presently offered by the government provide little tax exemption," said Taneja, a mother of two.
If not enough of the rise in incomes goes toward savings it could lead to other problems for the economy.
"The government has to raise savings. It is a virtuous cycle that kicks in when savings goes up, investment goes up and GDP grows," said D.K. Joshi, chief economist at CRISIL, a leading credit rating agency, which also advises on risk and policy.
"If on the other hand your investment goes up and savings doesn't, your current account deficit gets bloated."
There is work to do. The World Bank estimates the gross savings rate - corporate, government and domestic savings - dipped below 30 percent in 2014 for the first time in over a decade.
Bank deposits, a proxy for financial investments by India's conservative households, grew just 10.6 percent in the September quarter. That is well below expected capacity, which some analysts put at 1.5 times economic growth: closer to 15 percent.
SAVE, SAVE, SAVE
Government initiatives to pull more cash out from under India's mattresses have had little success.
A recent gold deposit scheme to monetise more of the 20,000 tonnes of gold Indians have hoarded has attracted just 400 grammes.
Another plan to raise 400 billion rupees ($6 billion) through tax-free infrastructure bonds was announced in this year's budget, but the specifics are yet to be finalized.
New Delhi still hopes higher incomes, lower inflation and a push to create more than 190 million new bank accounts will boost gross savings back above 30 percent, but it is unlikely to hit the peak savings rate of over 36 percent soon.
But there are some encouraging signs that Indians are becoming more interested in financial investments: equity mutual funds have seen inflows of 798.5 billion rupees so far this year.
But overall equity participation in India remains paltry. Less than 2 percent of Indians hold shares, compared to 30 percent of Koreans and 10 percent of Chinese.
The last time India boosted pay and allowances for government officials in 2008, the household savings rate jumped to 25.2 percent from 23.6 percent.
That rate has since dropped closer to 18 percent, much of it still flowing into gold and property.
But if even 16.5 percent of the newly raised wages and pensions for the public sector flows into financial savings - a target set by the current five-year plan to 2017 - then close to $14 billion in new cash could be pumped into the system.
That would be more than double the amount that can be expected at the current savings rate, and it would be enough to cover almost 5 percent of planned government spending this fiscal year.
OPEC to continue with current oil production levels despite fears of prices sinking to $20
Dubai/London:MMNN:25 Nov. 2015
The Organisation of the Petroleum Exporting Countries (OPEC) is determined to keep the production of oil the same despite the result of the financial strain on the policy's chief architect, Saudi Arabia, which has alarmed weaker members who fear prices may slump further towards $20.
Any policy U-turn would be possible only if large producers outside the exporters' group, notably Russia, were to join coordinated output cuts. While Moscow may consult OPEC oil ministers before their six-monthly meeting next week, the chances of it helping to halt the price slide remain slim.
"Unless non-OPEC (members) say they are willing to help, I think there will be no change," said a delegate from a major OPEC producer. "OPEC will not cut alone."
When the exporters' group last met in Vienna in June, Saudi oil minister Ali al-Naimi and those from other wealthy Gulf states could barely hide their jubilation.
OPEC's historic decision in November 2014 - to pump more oil and defend its market share against surging rival suppliers - was working, they proclaimed as crude traded near $65 per barrel. Six months later, it has hit $45, down from as much as $115 in the middle of last year.
Now some member states are talking about a return to twenty-dollar-oil, last seen at the turn of the millennium. They point to Iranian confidence that international sanctions on its economy will be lifted by the end of the year.
"Iran is announcing its production is going to increase as soon as they lift the sanctions and we need to do something. We (OPEC) cannot allow going into a war of prices. We need to stabilise the market," Venezuelan oil minister Eulogio del Pino said on Sunday. When asked how low prices could go next year if OPEC failed to change course, he said, "Mid-20s."
Goldman Sachs said this year it saw a possibility of crude going even below $20 because of the huge global oversupply, a strong dollar and a slowing Chinese economy.
Most analysts doubt the Iranian sanctions will be lifted before next spring under its nuclear deal with world powers, but sooner or later its output will rise.
Saudi under strain
Already the collapse in prices has partly achieved OPEC's goals. It has boosted global demand and curbed growth in supplies of US shale oil, which is relatively expensive to produce. Non-OPEC supply is also expected to fall for the first time in almost a decade next year as struggling producers cut back on capital spending.
But the world is still producing much more oil than it needs. Russian output has unexpectedly set new records and global stocks are ballooning.
Even the finances of Saudi Arabia, which led OPEC's policy shift, are under more strain. Standard & Poor's rating agency forecasts that its (Saudi Arabia's) budget deficit will rocket to 16 percent of GDP in 2015 from 1.5 percent in 2014.
Riyadh describes this year's deficit as manageable. However, Bank of America Merrill Lynch said on Monday it believed the pressure was so high that the Saudi government would be forced either to devalue its dollar-pegged currency or cut oil output.
Such a cut would mean executing an about-face that many rivals would interpret as a strategy failure. Keeping the taps open while hoping for a longer-term payoff still appears to be the choice of Riyadh and its wealthy Gulf allies - Qatar, the United Arab Emirates and Kuwait.
Titan Co partners with HP to launch a range of smart watches
New Delhi:MMNN:23 Nov. 2015
Watch maker Titan Co and global information technology major HP on Monday joined hands to offer a range of smart watches to be launched soon.
The new relationship between HP Inc. and Titan combine innovative materials, design and custom technology to deliver products that are responsive, and not intrusive, Titan Co said in a statement.
"The range of smart watches will be launched later this year in India and select international markets," it added.
Titan Co CEO (Watches and Accessories Division) S Ravi Kant said the two companies would create a unique lifestyle offering for people not only in India, but across the world.
This category of smart watches is going to change the way people view the art of time-keeping and beyond. They can still wear "a drop-dead gorgeous watch on their wrist infused with 'smart' technology for a new era of access and connectivity", he added.
HP Inc General Manager, Wearables and Smart Platforms Sridhar Solur said although personal style is the ultimate self-expression, some smart accessories on the market force consumers to sacrifice form for function.
"Our legacy of innovation is helping fashion-forward brands infuse technology into their designs to give consumers the stylish timepieces they want but that are more connected and responsive to the way they live today," Solur said.
Titan, a JV between Tata Group and Tamil Nadu Industrial Development Corporation (TIDCO) has presence in watches, jewellery and eyewear. It closed 2014-15 with an income of Rs 11,791 crore, a growth of 9% over the previous year.
Seventh Pay Commission's Bonanza Will Cost Rs 1 Lakh Crore Per Year
New Delhi:MMNN:20 Nov. 2015
The Seventh Pay Commission has proposed a 23.5 per cent hike in salaries of central government employees. Pensioners will get 24 per cent hike if the Cabinet okays the recommendations of the pay commission. The proposals are likely to be made effective January 1, 2016.
The central government will have to incur an expenditure of Rs 1.02 lakh crore for enhanced salaries and pensions per year. Of this, Rs 28,000 crore will go for salary hikes of railway employees. As a percentage of GDP, the hike in salaries and pensions will account for 0.65 per cent of the country's GDP.
The sharp rise in salaries of central government employees is expected to boost consumption and aid economic recovery. The stock market on Friday reacted positively to the pay commission's recommendations. Consumption-oriented stocks like auto and consumer durables edged higher.
However, the revised salary and pension payouts could risk the government's fiscal consolidation path. Analysts say that the government's target of curbing fiscal deficit to 3.5 per cent for 2016-17 looks challenging.
Here are the big recommendations of the Seventh Pay Commission:
Basic salaries of 47 lakh serving central government employees will go up by 16 per cent, while their allowances will rise by 63 per cent. As a result, the overall hike in salaries will be 23.55 per cent. This compares with the 35 per cent salary hike central government employees got on implementation of the sixth Pay Commission in 2008.
State governments and public sector units are likely to follow suit, and give a hike to their employees based on pay panel's recommendations. According to estimates, in totality, the salaries of 1.8 crore employees will get impacted by the pay panel's recommendations.
The house rent allowance has been increased by a massive 139 per cent; 52 allowances have been done away with, while 36 allowances have been subsumed in existing allowances or in newly proposed allowances.
Pension of 52 lakh retired central government employees will go up by 24 per cent, according to the recommendations of the seventh Pay Commission.
A system on the lines of One Rank One Pension (OROP) for the armed forces has also been proposed for government officials for the first time.
The minimum salary for central government employees has been fixed at Rs 18,000 per month. The salary for employees in the apex scale has been capped at Rs 2.25 lakh per month. However, the salary of cabinet secretary (the highest-ranking civil servant) has been fixed at Rs 2.50 lakh per month.
Central government employees will get an annual increment of 3 per cent. The seventh Pay Commission has also recommended the abolition of grade pay and pay band for central government employees.
Military Service Pay (for armed forces) for service officers has been more than doubled to Rs 15,500 per month. Short service commissioned officers will be allowed to exit the armed forces at any point in time between 7 to 10 years of service. A uniform retirement age for all paramilitary forces at 60 years has been proposed.
Jet, IndiGo and SpiceJet to consider legal options against CCI order
New Delhi:MMNN:18 Nov. 2015
The three airlines collectively fined Rs 258 crore by fair trade regulator for acting like a cartel and "overcharging cargo freight in the garb of fuel surcharge" have decided to legally challenge this order.
The Competition Commission of India (CCI) had on Tuesday asked Jet, IndiGo and SpiceJet to pay Rs 151.7 crore, Rs 63.7 crore and Rs 42.5 crore, respectively, within 60 days.
A Jet Airways spokesman said, "Jet Airways is not in contravention of the provisions of the Competition Act and shall pursue all available legal steps to defend its position."
A statement issued by IndiGo said, "The company is studying the CCI Order and will take legal steps to challenge the order in the appropriate forum. The company has been legally advised that it is not in contravention of the provisions of the Competition Act, 2002."
While SpiceJet did not issue a statement, it is learnt that this airline company too is examining legal options to challenge the CCI verdict.
The CCI order had come on a complaint filed by Express Industry Council of India which also named Air India and GoAir, apart from the three airlines. The fair trade regulator did not find AI and GoAir guilty.
"The basic concern in the present case is the overcharging of cargo freight, in the garb of fuel surcharge, by the air cargo transport operators which adversely affect consumers beside stifling economic development of the country. Such cartels in the air cargo industry particularly undermine economic development in a developing country," the CCI order had said.
It adds that fuel surcharge was essentially introduced to mitigate the fuel price volatility. "(It) will continue to be used as a pricing tool to the detriment of the users, and thereby will also harm the competition. At the same time, it cannot be disputed that airlines are incurring losses.... the Commission finds it appropriate to impose a penalty at the rate of 1 % of their average turnover of the last three financial years," it had said.
Jet, IndiGo and SpiceJet have been asked to stop indulging in anti-competitive practices. No penalty was imposed on AI as its conduct was not found at par with other airlines. Similarly, no penalty was imposed upon GoAir as it gave its cargo belly space to third party vendors with no control on any part of commercial/economic aspects of cargo operations done by vendors, including imposition of fuel surcharge.
Maggi Sale Back on Snapdeal, Sold Out in Minutes Again
MMNN:16 Nov. 2015
Snapdeal resumed its sale of Maggi welcome kits on Monday after selling out the first batch of 60,000 kits in five minutes last week. This time too all the Maggi kits were sold it in a matter of minutes. However, exact details are awaited from Snapdeal.
Nestle's Maggi has made a comeback in to the market after a gap of five months, and customers have literally lapped up the first batch of offerings that had 60,000 welcome kits in a matter of minutes.
The Snapdeal offer is christened 'Dil Ki Dil' and the hashtag 'DilKiDilWithMAGGI' started trending on Twitter after the sale was resumed.
Maggi was earlier banned after it was allegedly found to have lead content beyond permissible limits.
The Maggi welcome kit offering from Snapdeal contains the following items - 12 packs of Maggi Masala Noodles, a 2016 Maggi calendar, a Maggi fridge magnet, Maggi post cards and a 'Welcome Back' letter
The Maggi kit is priced at Rs 144 (12 packs of noodles priced at Rs 12 each.)
Maggi has been relaunched in 100 towns through 300-odd distributors and is being rolled out in a staggered manner across the country, except in eight states where it is still not allowed.
Maggi noodles had passed tests by three government-accredited laboratories, as ordered by the Bombay High Court which in August had lifted ban on the instant noodles that was imposed by food safety regulators.
Maggi was banned in June by Food Safety and Standards Authority of India (FSSAI) which stated that it was "unsafe and hazardous" for consumption due to presence of lead beyond permissible limits. Nestle had withdrawn the noodles brand from the market.
Economic recovery dilemma in India: IIP falls, inflation rises
NEW DELHI:MMNN:13 Nov. 2015
Consumer price inflation scaled a four-month peak of 5% in October, while industrial output growth hit four-month trough of 3.6% in September, after touching a 34-month high in the previous month, suggesting that a firm recovery is still some way off, reports fe Bureau in New Delhi. While most analysts believed retail inflation would still undershoot the central bank’s expectation of 5.8% by January 2016, given that food inflation was just 5.25% in October despite a second straight year of a deficient monsoon, it was the slowdown in the Index of Industrial Production (IIP) growth that surprised them. However, they don’t expect any rate cut by the Reserve Bank of India in its next monetary policy review meeting in December, as the central bank already fronted a 50-basis point reduction in September.
On the CPI front, analysts believe the latest spiral in food inflation, which was caused by a 42.2% surge in pulse inflation that contributed some 60 basis points to headline retail inflation, will remain under control in the coming months, as kharif harvests start to flood the markets.
Interestingly, rural CPI inflation was higher at 5.54% in October, compared with 4.28% for urban India. While food inflation was lower in rural India than urban areas, services inflation was higher for rural India.
Despite the latest dip in industrial growth, some analysts expect better IIP growth in October, pointing at some bright spots: Excise duty collection grew over 68% in October and rose at a good pace even without the hike in duty rates, while passenger cars and two-wheeler sales grew last month.
Even the usually volatile capital goods segment has witnessed growth in 10 out of 11 months through September, that too on a relatively more unfavourable base, suggesting enhanced government spending was starting to have an impact. To top it all, a conducive base would help the calculation of the IIP growth in October, as the index had contracted by 2.7% a year before.
Some analysts said the 8.4% rise in consumer durables in September, its fourth straight month of growth, might have been a result of some pick-up in urban consumption levels, as already shown by the auto sales numbers, even though it, too, was also aided by a conducive base. Production of consumer durables had witnessed growth in April after 10 straight months of contractions and the segment also recorded a slump once (in May) so far this fiscal.
However, risks remain. The fact consumer non-durables output contracted 4.6% in September from a year earlier, having contracted three times in the last four months, points at the negative impact of last year’s weak farm harvests on rural India. Rural demand has already been dented by a projected 2% drop in kharif grain harvest, damages to the 2014-15 rabi crop from unseasonal rains, a plunge in commodity prices for more than a year and low wage growth. That’s why any sustained recovery in consumer demand is still awaited. Moreover, the outlook for exports continues to be gloomy, and the recovery in infrastructure remains confined to a few sectors.
Adani to buy L&T’s Kattupalli Port
Ahmedabad:MMNN:9 Nov. 2015
Adani Ports and Special Economic Zone (APSEZ), India’s largest port developer and operator, on Monday said it will acquire the Kattupalli Port in Tamil Nadu from L&T Shipbuilding Ltd (LTSB) a subsidiary of Larsen and Toubro Ltd. The company did not disclose the financial details of the transaction.
Adani Ports said in a stock exchange filing that its subsidiary Adani Kattupalli Port Pvt. Ltd has entered into an in-principle agreement for the strategic acquisition. The transaction is subject to necessary approvals from the government of Tamil Nadu and the central government, and the port being demerged from LTSB, it said.
Currently, L&T operates both the port and a shipyard under LTSB.
Kattupalli is a deep-water all weather port with an international container terminal located 35 km from Tamil Nadu and well-connected to the hinterland. The port commenced commercial operations in January 2013 and has two berths with a total quay length of about 710 meters. The berths are equipped with six quay cranes and are designed to handle container, dry bulk and break-bulk cargo. Currently, the port has a cargo handling capacity of 1.2 million TEUs per annum. Environmental approval for further expansion is already in place.
Speaking on the development, Gautam Adani, chairman, Adani Group said, “The Kattupalli agreement is yet another step by us to continue to enable the development of the port infrastructure that is critical for our country. The Kattupalli port is a strategic complement to our Ennore Container Terminal which is getting commissioned next year.”
The Kattupalli Port is located adjacent to and north of Ennore Port, where APSEZ is developing the Ennore container terminal.
Both these ports are expected to together reduce congestion in the region and aid the growth of Tamil Nadu and the surrounding regions.
Earlier in May 2014, L&T group company L&T Infrastructure Development Projects Ltd and Tata Steel Ltd sold their stake in Dhamra port in Odisha to Adani Ports and Special Economic Zone Ltd.
PSU banks gain post SBI Q2 results; CNX PSU Bank index up 3%
New Delhi:MMNN:6 Nov. 2015
Banking shares, mainly public sector undertaking (PSUs), are trading higher in otherwise subdued market after the State Bank of India (SBI) reported a better-than-expected net profit for the quarter ended September 30, 2015 (Q2FY16).
SBI, Bank of Baroda, Oriental Bank of Commerce and Punjab National Bank are trading higher by up to 5%, while Andhra Bank, Canara Bank, Union Bank of India, Bank of India and Indian Overseas Bank up 1%-2% on the National Stock Exchange (NSE).
At 02:42 PM, CNX PSU Bank index was up 3% as compared to 0.65% rise in Bank Nifty and 0.18% gain in the benchmark CNX Nifty.
Country's largest lender SBI has reported 25% year on year (YoY) jump in standalone net profit at RS 3,879 crore in Q2FY16 against an average analyst estimate of Rs 3,582 crore. Net interest income (interest earned minus interest expended) grew 7.4% at Rs 14,252 crore on YoY basis.
The bank’s assets quality also improved during the quarter. Gross non-performing assets (NPA) as a percentage of gross advances declined to 4.15% in September quarter compared 4.29% in June quarter and 4.89% in year-ago period. Net NPA also fell to 2.14% during the quarter from 2.24% in preceding quarter and 2.73% in previous year quarter.
Punjab National Bank has also seen its asset quality improvement on sequentially basis. The bank’s gross NPA declined to 6.36% in September quarter from 6.47% in June quarter and net NPA was down to 3.99% from 4.05% in preceding quarter.
Bank of Baroda, the largest gainer among PSU banking pack, was up 5% to Rs 166, bouncing back 19% from intra-day low on expectation of the new management is reorganising the lending book and next quarter will be better.
The stock tanked 12% to Rs 140 after the bank reported a sharp 89% YoY fall in net profit at Rs 124 crore in Q2, owing to high provisions as the private lender's NPAs worsened.
Asset quality declined sharply with the gross NPA increased rising sequentially to 5.56% in Q2FY16 from 4.13% in Q1FY16, whereas Net NPA at 3.08% in the September quarter as compared to 2.07% in previous quarter.
A combined 36.69 million shares already changed hands on the counter against an average sub three million shares that were traded daily in past two weeks on the NSE and BSE.
SunEdision to Supply Cheapest Solar Power in India
New Delhi:MMNN:4 Nov. 2015
US-based SunEdision Inc has won a bid to sell solar power in India at a record low tariff of Rs 4.63 ($0.0706) per kilowatt-hour,
an Indian government official said, which could make the renewable energy cheaper than fossil fuel-derived electricity.
The company won the auction for a 500 megawatt project in the southern state of Andhra Pradesh, Upendra Tripathy,
new and renewable energy secretary, told Reuters on Wednesday.
The previous low was Rs 5.05 per kilowatt-hour, he said.
SunEdision could not immediately be reached for comments outside regular US business hours.
($1 = Rs 65.6075)
Hero MotoCorp's Brijmohan Lall Munjal, doyen of India's 2-wheeler industry, passes away
New Delhi:MMNN:2 Nov. 2015
Hero MotoCorp patriarch and doyen of Indian two-wheeler industry, Brijmohan Lall Munjal, passed away this evening after a brief illness. He was 92.
Munjal passed away at a private hospital in South Delhi, according to family sources. He is survived by three sons and one daughter. The cremation will be done tomorrow.
Munjal had retired from active role and become Chairman Emeritus of the over $4-billion group earlier this year and remained on the board of the company as non-executive member.
The Hero Group, which officially came into existence in 1956, had started its activities in the early 1940s as a bicycle-maker run by the four brothers.
Munjal was born in 1923 at Kamalia in present-day Pakistan. After India’s independence, the Munjal brothers started a small business of manufacturing bicycle components in Ludhiana and went on to build one of the largest business groups in the country.
Munjal led the Hero Group to a number of firsts. Hero MotoCorp is the world’s largest two-wheeler company now for the 14th year in a row. Another group firm, Hero Cycles, has been the largest manufacturer of bicycles since 1986.
Munjal led the Hero group to form a joint venture with Japan’s Honda in 1984, the joint venture — Hero Honda, went on to become the world’s single-largest motorcycle maker. The partnership ended in 2011.
Munjal was among the earliest Indian industrialists to effectively implement (Just-in-Time) JIT as well as backward integration and is acknowledged as the trend-setter in the area.
Since early days, he ran the organisation with a sharp focus on current asset management, which helped evolve vendor efficiency and zero-inventory management practices at Hero.
Beside Hero Group, Munjal held leadership positions in many national associations such as CII, SIAM, AICMA and PHD and had served as a member of the Regional Board of Reserve Bank of India. He was conferred with the ‘Padma Bhushan’ in 2005 in recognition of his contribution in the field of trade and industry.
Munjal helped establish numerous medical, educational and infrastructure facilities. Amongst his notable contributions to Ludhiana are the Ludhiana Stock Exchange, the Ludhiana Aviation Club, Ludhiana Management Association and the Dayanand Medical College & Hospital, of which he was the Chairman Emeritus, after being its President for over three decades.
World Bank maintains India's economic growth outlook at 7.5% for FY16
New Delhi:MMNN:30 Oct. 2015
The World Bank has retained its India growth forecast for 2015-16 saying it will continue to grow, but the catch is the acceleration year-on-year will be gradual.
"The latest India Development Update expects India's economic growth to be at 7.5% in 2015-16, followed by a further acceleration to 7.8% in 2016-17 and 7.9% in 2017-18," the multilateral lending agency said in a report released here.
"However, acceleration in growth is conditional on the growth rate of investment picking up to 8.8% during FY16 to FY18," it added.
Speaking at the launch of the report, World Bank India's Senior Country Economist Frederico Gil Sander said India has taken advantage of the sharp decline in global oil and commodity prices to eliminate petrol and diesel subsidies and increase excise taxes.
"Resources from lower subsidies and higher taxes have been well utilised in lowering deficits and increasing capital expenditure."
The most significant risks to the outlook, he further said, stem from the banking sector and financing requirements of infrastructure companies.
"Public sector banks, which account for three-fourths of domestic credit, are under stress, with a rising share of non-performing assets," Gil Sander noted.
The senior economist felt that India is relatively well-positioned to weather global volatility in the short term.
The report dwelt at length on states, which are now responsible for 57% of spending and account for 16% of GDP. Of this, nearly 74% of the funds are untied compared with an average 57% during the 13th Finance Commission period, getting more flexibility to states.
It suggested that the government need to collect more direct taxes to boost revenues.
"India's direct tax collection is among the lowest in the world. Direct taxes account for a mere 5.7% of GDP in India compared with 11.4% in OECD countries," the report said.
Making a special mention of the government's efforts for successfully bringing current account deficit (CAD) down to 1.4% in 2015-16, it said CAD is likely to inch up to 1.7% in 2016-17 and 2% in 2017-18.
Stressing on the need to increase export-oriented growth, the report said, "Although India may be able to achieve a fast GDP expansion without export growth for a short period, sustaining high GDP rates over a longer period will require a recovery of exports."
India Moves Up in World Bank's Ease of Doing Business List
MMNN:28 Oct. 2015
Prime Minister Narendra Modi's aspiration to turn the country into a top investment destination has got off to a positive start, with India now ranked by the World Bank at 130 of 189 countries on "Ease of Doing Business." That is up 12 places from its original ranking last year and four places from its rank on a revised list.
1) India was ranked 142 by the World Bank in 2015 on ease of doing business and later its rank was revised to 134 based on a new methodology.
2) PM Modi has said that he wants India to be among the top 50 countries on the list compiled each year by the World Bank in its report on doing business.
3) China is now ranked 84, moving up six spots. Singapore, New Zealand and Denmark occupied the first three spots in the list while South Sudan, Libya and Eritrea were ranked at the bottom three.
4) Terming the improvement in India's ranking a "remarkable achievement", World Bank Chief Economist Kaushik Basu said, "Going from 142 in the world to 130, as India has done, is very good sign. It gives a good signal about the way things are moving in India."
5) The rankings are based on 10 indicators such as how easy it is to start a business and sometimes form the basis of foreign investments in a country. According to the new report, it takes 29 days to start a business in India now; it took 127 days in 2004.
6) In May 2015, the government eliminated the minimum capital requirement to start a business and also ended the requirement to obtain a certificate to commence business operations, which helped it improve its rankings, the World Bank said.
7) The biggest improvement was seen in the area of providing power to businesses, where India's ranking improved from 99 in 2015 to 70 in 2016, the World Bank said. "Now companies can get connected to the grid, and get on with their business, 14 days sooner than before," the report said.
8) The World Bank noted that India recorded the biggest increase in the distance to frontier (a measure of a country's absolute performance) score in South Asia since 2004. "More reforms are ongoing - in starting a business and other areas measured by Doing Business - though the full effects have yet to be felt," it said.
9) India is ranked 8th in terms of protecting minority investors, 42nd in getting credit, 70th in getting electricity, but scores poorly in dealing with construction permit with a rank of 183 out of 189 countries. Enforcing contract (rank 178), paying taxes (rank 157), resolving insolvency (rank 136) are other areas where India ranks poorly.
10) The World Bank signaled that India's ranking could improve further as a number of initiatives taken by the government have not been factored in the current years' report. "Several other initiatives to simplify the start-up process were still ongoing on June 1, 2015, the cutoff date for this year's data collection. These include developing a single application form for new firms and introducing online registration for tax identification numbers," the report said.
Bharti Airtel Q2 profit jumps 10% as mobile internet usage grows
Mumbai:MMNN:26 Oct. 2015
Bharti Airtel Ltd, India’s top mobile carrier by subscribers, posted a 10% rise in quarterly net profit that beat estimates, helped by a surge in data usage by customers.
A rapid proliferation of smartphones, led by Chinese brands, has prompted Indian users to use their handsets to access the Internet and demand faster downloads, which are typical of 4G services.
India is also seeing unprecedented demand for fast data as its booming startup industry leans heavily on stable internet connections to get customers.
“With the commercial launch of high speed 4G services across 334 towns and roll-out of 3G services ... we are now best positioned in the industry to leverage the fast growing data market,” Gopal Vittal, chief executive of Airtel’s India & South Asia unit, said in a statement.
Bharti Airtel has been in the lead in bringing fourth generation data services to customers in India, ramping up coverage ahead of rival Reliance Jio, the telecommunications unit of cash-rich conglomerate Reliance Industries Ltd’s, 4G services launch.
In August, Airtel said it would price its 4G services at existing 3G costs, and the carrier is allowing some users to migrate to 4G for free.
These efforts have helped Airtel add more subscribers than rivals in the months of July and August.
Airtel, however, saw a drag from falling voice call charges, same as rival Idea Cellular did last week.
As voice calls get cheaper, telecommunications carriers in India are focussing on building their data service networks to cater an increasing number of customers who prefer using apps to calling.
Average revenue per user for voice calls, a key measure of telecom health, dropped to 140 rupees from 158 rupees same quarter last year for Airtel.
Average revenue per user from data rose to 193 rupees in the quarter, up from 150 rupees a year earlier.
Bharti Airtel, headed by Indian billionaire Sunil Mittal, said net profit for the quarter ended Sept. 30 rose to 15.23 billion rupees ($234.4 million), up from 13.83 billion rupees a year earlier.
Analysts on average expected the company to post a net profit of 11.5 billion rupees, according to Thomson Reuters data.
Total revenue rose 4% to 238.36 billion rupees for the second quarter from a year earlier. Mobile data revenue grew 60% during the quarter.
Reliance Group to invest Rs 46,000 cr in MP
BHOPAL:MMNN:23 Oct. 2015
Anil Ambani-led Reliance Group will invest Rs 46,000 crore in Madhya Pradesh in defence, information technology, electronics manufacturing and energy sectors. This was informed by Reliance Group chairman Anil Ambani during a meeting with chief minister Shivraj Singh Chouhan here on Thursday.
According to an official press release, Ambani said Reliance Group will invest in defence production sector in Pithampur, near Indore and Bhopal.
Integrated land system defence manufacturing hub will be developed in Pithampur and rotary wing helicopter manufacturing unit in Bhopal. About Rs 6000 crore will be invested in energy and defence production sectors. Global level data storage centres will be set up by the group in the state in information technology sector. For this, Rs 1500 crore will be invested in Pithampur.
The group will set up a unit in Pithampur to produce ingots and polysilicon required to manufacture solar panels at a cost of Rs 27,000 crore. The group will expand Sasan power project with an investment of about Rs 12,000 crore. These projects will generate about 70,000 direct and indirect jobs.
He also gave a proposal to start a campus of the management institute Indian School of Business in Bhopal. Reliance Group has already invested Rs 35,000 crore in cement, telecom and financial services sectors in Madhya Pradesh, creating jobs for a large number of people. Reliance Group has chosen 400 acres of land in Pithampur and 70 acres in Bhopal.
The chief minister said every possible effort is being made to promote investments in the state. Investment-friendly policies have been implemented. Special attention is being paid to increase job opportunities along with the promotion of industries. Investors will not be allowed to face any difficulty in the state, he added.
Chief secretary Anthony de Sa, Reliance Group's CEO Satish Gupta, principal secretary industries Mohammad Suleman, principal secretary to CM S K Mishra, secretary industries V L Kantarao, Road Development Corporation MD Manish Rastogi and Trade and Investment Facilitation Corporation Limited MD D P Ahuja also attended the meeting.
Reliance MF to acquire Goldman Sachs India MF biz for Rs. 243 crore
Mumbai:MMNN:21 Oct. 2015
In its first ever acquisition, Reliance Capital Asset Management (RCAM) on Thursday announced takeover of global giant Goldman Sachs’ mutual fund business in India for Rs. 243 crore in an all-cash deal as yet another foreign player exits the Rs. 13 lakh crore Indian MF market.
The deal, under which RCAM will acquire all 12 onshore mutual fund schemes of Goldman Sachs Asset Management India with total asset under management of Rs. 7132 crore, would also make Reliance MF the exclusive fund manager for the government’s ambitious Central Public Sector Enterprises (CPSE) Exchange Traded Fund.
The transaction has been approved by the boards of the two companies and is expected to be completed in the current fiscal, RCAM’s parent firm Reliance Capital said in a statement.
Reliance Capital is the financial services arm of Anil Ambani-led business conglomerate Reliance Group and is also present in insurance, brokerage and wealth management among other areas.
Goldman Sachs was given the mandate last year to manage CPSE ETF through which the government has so far raised Rs. 4,000 crore by selling part of its stake in ten central PSUs as part of its disinvestment programme.
Besides further consolidating the position of RCAM, which runs Reliance Mutual Fund and is the largest asset manager in India with total AUM of over Rs. 2.5 lakh crore across mutual funds, pension funds, managed accounts and offshore funds, the deal also marks yet another exit by a foreign player from the Rs. 13 lakh crore Indian mutual fund industry.
Goldman Sachs had entered the Indian mutual fund industry in 2011 with acquisition of Benchmark Mutual Fund for Rs. 120 crore. In last few years, a number of global players have exited the Indian mutual fund business.
Standard Chartered sold its mutual fund business in India to IDFC in 2008, Fidelity sold its mutual fund to L&T Finance in 2012, while last year HDFC MF acquired Morgan Stanley’s fund business here.
Besides, Birla Sunlife has acquired ING Mutual Fund, Kotak MF has bought PineBridge Mutual Fund and Pramerica has taken over Deutsche Bank’s mutual fund business in India.
Still, there are more than 40 fund houses in the country with total AUM of over Rs. 133 lakh crore, which has been growing for eight consecutive quarters now. In terms of mutual fund AUM, HDFC MF is the largest (Rs. 1.71 lakh crore), followed by ICICI Prudential (Rs. 1.65 lakh crore) and Reliance MF (Rs. 1.53 lakh crore) at the second and third places respectively.
HDFC MF was also in the race to acquire Goldman Sachs’ India mutual fund assets, but lost out and the deal will help Reliance MF close the gap on its two bigger rivals.
Globally, Goldman Sachs Asset Management is one of the biggest fund managers with AUM of USD over 1.19 trillion across countries and asset classes.
“Reliance Capital Asset Management will pay a total sum of Rs. 243 crore (USD 37.5 million) in cash to acquire all onshore mutual fund schemes, including exchange traded funds, of GSAM India. The transaction is expected to be completed by the end of this fiscal year, subject to necessary regulatory approvals,” the two firms said in a joint statement.
“This acquisition by RCAM is an important first step in our overall strategy to strengthen our businesses through selective inorganic growth. GSAM India has a strong bouquet of schemes and a talented team. We are confident that together they will complement and enhance RCAM’s overall offerings to our investors,” said Sam Ghosh, Executive Director, Reliance Capital.
Goldman Sachs India Chairman Sonjoy Chatterjee said, “GSAM will continue to deliver global asset management services to Indian clients and will remain a significant investor in Indian securities through regional and global managed GSAM funds.”
“In the meantime, we remain committed to growing our investment banking and securities franchise in India and we continue to feel extremely positive about India as an important and growing market for Goldman Sachs overall.”
RCAM CEO Sundeep Sikka said the deal will add over half a percent to its market share.
“We will ensure that we maintain seamless continuity for all GSAM India fund investors across all schemes. Going forward we would be willing to consider more such acquisitions that add to our strength and complement our portfolio,” Mr. Sikka added.
“We feel this business is best positioned to achieve long-term success under the direction of an asset manager with an established onshore franchise. We are deeply encouraged by the growing investor demand and Government support for the burgeoning Indian ETF industry,” said Sanjiv Shah, Co-Chief Executive Officer, GSAM India.
GSAM India currently manages 12 mutual fund schemes, including 10 ETF schemes, and is the largest ETF provider in India. It has a total AUM of Rs. 7,132 crore (USD 1.1 billion) as of September 30, 2015 which includes Rs. 2,172 crore (USD 334 million) of AUM in the CPSE ETF for which GSAM India is currently the exclusive fund manager.
As part of the transaction, RCAM will extend offers of employment to substantially all of GSAM India’s employees dedicated to supporting the ETF business.
Wal-Mart Paid Millions of Dollars in Bribes in India
Washington:MMNN:19 Oct. 2015
American multinational retail corporation Wal-Mart is suspected to have paid bribes worth millions of dollars in India, according to a media report.
In a major report, The Wall Street Journal said Wal-Mart's "suspected bribery" unearthed in India involves thousands of small payments to low-level local officials to help move goods through customs or obtain real-estate permits.
"The vast majority of the suspicious payments were less than $200, and some were as low as $5, the people said, but when added together they totalled millions of dollars," the daily said.
In 2013, Wal-Mart shelved plans to open retail stores in India by severing a joint venture with Bharti Enterprises Ltd and instead decided to become solely a wholesaler there, the report said.
Wal-Mart, which was pushing the previous UPA regime for opening of the multi-brand retail sector, was also involved in lobbying before the US Congress in this regard, Congressional disclosure reports have said in the past few years.
According to the report, Wal-Mart's massive bribery efforts is unlikely to bring in any penalty on it as its Indian operation does not yield any profit under the provisions of the Foreign Corrupt Practices Act (FCPA) of the United States.
"Because penalties under the FCPA are often connected to the amount of profit the alleged misconduct generated, the payments in India wouldn't be likely to result in any sizable penalty, since Wal-Mart's operations there haven't been particularly profitable, said people familiar with the matter," the daily reported.
There was no immediate response from Wal-Mart's corporate headquarters here on the Wall Street Journal's report on its bribery in India.
According to The Wall Street Journal, federal investigators "found evidence of bribery in India, centering on widespread but relatively small payments made to local officials there", during the course of its "high-profile federal probe" into allegations of widespread corruption at Wal-Mart Stores Inc's operations in Mexico.
The investigations though have found little in the way of major offenses in Mexico, and is likely to result in a much smaller case than investigators first expected, the daily said.
Bank of Baroda fraud: RBI's Rajan says guilty will have to pay the price
Aizawl:MMNN:16 Oct. 2015
Prime Minister Narendra Modi's bet on higher public spending to spur economic activity in India has started paying off, as capital investment shows signs of sustained revival after years of uneven growth.
But corporate spending is still tepid and federal revenues remain stressed, raising the risk of another false dawn for Asia's third largest economy as it tries to recover momentum.
Annual growth in capital goods production, a proxy for capital investments, hit a 14-month high of 22 percent in August, government data showed on Monday. That helped overall industrial output expand at its fastest pace in almost three years.
While the figures, notoriously volatile and lumpy, were inflated by a favourable statistical base, the annual pace of expansion in the sector, measured on a three-month moving average, was 10.1 percent in August versus 3.8 percent a month ago.
Encouragingly, the recovery also appears to be becoming broad-based.
"It's a very positive sign," said a senior official at the finance ministry, who asked not to be identified because he was not authorised to speak to the media. "It shows the strategy is showing results."
Weak capital investment has been a key factor behind India's struggle to realise its growth potential. Statistically, the economy matched China's growth in the June quarter, but very few analysts think it is growing full steam.
With factories running nearly 30 percent below capacity, private companies are in little rush to make fresh investments. Stretched corporate balance-sheets are not helping, either.
That has led the government to step up to the plate.
At the risk of inviting the wrath of investors and ratings agencies, Modi's administration loosened fiscal deficit targets in this year's budget to double spending on roads and bridges.
Since April, public capital spending has clocked healthy growth of nearly 19 percent on the year, compared with a fall of 1.4 percent in the corresponding period last year.
The government reckons economic growth could increase by at least a percentage point if its departments don't underspend.
That will help it meet a growth target of 8 percent to 8.5 percent for the year ending in March 2016, up from 7.3 percent a year ago. The IMF, though, has lowered its estimate for India's 2015/16 growth to 7.3 percent, from 7.5 percent.
"Overall, the industrial production data indicate that despite slowing external demand, the domestic growth cycle is improving," said Sonal Verma, an economist with Nomura.
But spending the budget is not the only challenge. Finding resources to fund the spending is an equally daunting task.
Indirect tax receipts have grown nearly 33 percent between April and September this fiscal year, but sluggish collections from direct levies are expected to reduce the total tax intake by nearly $8 billion.
With tax refunds likely to increase in coming months, New Delhi could face a fiscal squeeze, making it tougher to keep up the pace of spending.
Higher corporate spending could have offset that. But Indian firms are waiting for better returns before committing new investments.
"With the private sector showing limited appetite for expanding capex, growth recovery in fiscal 2015/16 is likely to remain modest," economists at Yes Bank said in a note.
Revenues at India's top companies are expected to fall 8.2 percent in the July-September quarter, the biggest decline in at least four years, according to Thomson Reuters data.
Recovery at last? PM Modi's infrastructure splurge revives investment in India
MMNN:14 Oct. 2015
Prime Minister Narendra Modi's bet on higher public spending to spur economic activity in India has started paying off, as capital investment shows signs of sustained revival after years of uneven growth.
But corporate spending is still tepid and federal revenues remain stressed, raising the risk of another false dawn for Asia's third largest economy as it tries to recover momentum.
Annual growth in capital goods production, a proxy for capital investments, hit a 14-month high of 22 percent in August, government data showed on Monday. That helped overall industrial output expand at its fastest pace in almost three years.
While the figures, notoriously volatile and lumpy, were inflated by a favourable statistical base, the annual pace of expansion in the sector, measured on a three-month moving average, was 10.1 percent in August versus 3.8 percent a month ago.
Encouragingly, the recovery also appears to be becoming broad-based.
"It's a very positive sign," said a senior official at the finance ministry, who asked not to be identified because he was not authorised to speak to the media. "It shows the strategy is showing results."
Weak capital investment has been a key factor behind India's struggle to realise its growth potential. Statistically, the economy matched China's growth in the June quarter, but very few analysts think it is growing full steam.
With factories running nearly 30 percent below capacity, private companies are in little rush to make fresh investments. Stretched corporate balance-sheets are not helping, either.
That has led the government to step up to the plate.
At the risk of inviting the wrath of investors and ratings agencies, Modi's administration loosened fiscal deficit targets in this year's budget to double spending on roads and bridges.
Since April, public capital spending has clocked healthy growth of nearly 19 percent on the year, compared with a fall of 1.4 percent in the corresponding period last year.
The government reckons economic growth could increase by at least a percentage point if its departments don't underspend.
That will help it meet a growth target of 8 percent to 8.5 percent for the year ending in March 2016, up from 7.3 percent a year ago. The IMF, though, has lowered its estimate for India's 2015/16 growth to 7.3 percent, from 7.5 percent.
"Overall, the industrial production data indicate that despite slowing external demand, the domestic growth cycle is improving," said Sonal Verma, an economist with Nomura.
But spending the budget is not the only challenge. Finding resources to fund the spending is an equally daunting task.
Indirect tax receipts have grown nearly 33 percent between April and September this fiscal year, but sluggish collections from direct levies are expected to reduce the total tax intake by nearly $8 billion.
With tax refunds likely to increase in coming months, New Delhi could face a fiscal squeeze, making it tougher to keep up the pace of spending.
Higher corporate spending could have offset that. But Indian firms are waiting for better returns before committing new investments.
"With the private sector showing limited appetite for expanding capex, growth recovery in fiscal 2015/16 is likely to remain modest," economists at Yes Bank said in a note.
Revenues at India's top companies are expected to fall 8.2 percent in the July-September quarter, the biggest decline in at least four years, according to Thomson Reuters data.
Infosys beats expectation in Q2 with Rs 3,398 cr net; Rajiv Bansal resigns as CFO
MMNN:12 Oct. 2015
Infosys, India's second largest software exporter, reported a better-than-expected earnings for July-September quarter, but also announced that its CFO Rajiv Bansal has stepped down, resulting in huge volatility in the company's shares on the stock bourses.
The company's net profit during the quarter stood at Rs 3,398 crore, up 12 percent from Rs 3,030 crore posted in the previous quarter, while consolidated revenue was Rs 15,635 crore, up 8.9 percent.
Dollar revenue increased 6 percent to $2,392 million from $2,256 million.
A CNBC-TV18 poll had seen the company's profit at Rs 3,244 crore, revenue at Rs 15,210 crore and dollar revenue growth at 3.6 percent.
In June quarter, Infosys had raised dollar revenue guidance for FY16 to 7.2-9.2 percent from 6.2-8.2 percent. Analysts had expected the company to maintain its FY16 guidance of 10-12 percent in constant currency.
Reacting to the earnings, Infosys shares initially surged 4.4 percent to touch a high of Rs 1,219, but soon shed all its gains to tumble to a low of Rs 1,108.90, down 5 percent.
"While results in any one quarter are transitory snapshots of a long journey, we do see our focused execution along our strategy starting to produce encouraging results for our clients, shareholders and Infoscions," said Vishal Sikka, CEO and MD.
He said the endeavour is to make Infosys a services organisation that can truly partner with and amplify businesses. "I am encouraged by our progress," he said.
"We had strong all-round growth during the quarter driven by recent initiatives around service differentiation, improvement in client mining and higher focus on winning large deals,” said U B Pravin Rao, COO.
“Increase in revenue productivity was significant, volume growth was robust, client metrics and utilization improved while attrition remained stable,” he said.
“Our relentless focus on operational efficiencies has resulted in increase in operating margins despite higher variable payouts,” said Rajiv Bansal, CFO.
“The impact of significant currency volatility was effectively mitigated by our proactive hedging program,” he said.
Other highlights of the results:
* Liquid assets as of September 30 stand at Rs 32,099 crore, up from Rs 30,225 crore a quarter ago.
* Per capita revenue increased 2.6% in reported terms and 3.4% in constant currency terms
* 5 large deals signed during the quarter with total contract value of $983 mn
* Added 82 clients; total number of clients crosses 1,000
* Revenues are expected to grow 10-12% in constant currency
* Revenues expected to grow 13.1-15.1% in rupee terms
* Attrition inched up to 19.9% from 19.2% a quarter ago.
Vodafone wins Rs 8,500 cr transfer pricing case: Here's why it is important
MMNN:9 Oct. 2015
The Bombay High Court has set aside an order of Income Tax Appellate Tribunal (ITAT) which said the IT department had powers to raise tax demand on the company in a Rs 8,500 crore transfer pricing case. The move has come as a major relief to the telecom company.
What is the case all about?
The dispute relates to the sale of the Ahmedabad-based call centre business (Vodafone India Services formerly known as 3 Global Services) for assessment year 2008-09. The income tax department issued a notice to the company seeking to add Rs 8,500 crore to the taxable income of 2007-08, saying it has skirted the transfer pricing rules. Transfer pricing involves related entities dealing at arm's length to ensure fair pricing of the asset that is transferred. In December 2013, the department sought a tax of Rs 3,700 crore from the company in this case.
The company approached the Income Tax Appellate Tribunal against the tax demand, saying it was not an international transaction and did not attract transfer pricing rules. But the tribunal ruled in favour of the department on December 10 last year. It held the company had structured the deal with another India-based entity Hutchison Whampoa Properties with the intention to circumvent the transfer pricing norms, even though it was an international transaction wherein there was no arm's length dealing between the two related entities. It also referred the case back to the I-T department asking it to revise the amount to be recovered from Vodafone.
Vodafone then appealed against the order of the tribunal in the Bombay High Court.
Why is the high court order important?
The High Court has upheld the company's stand that the I-T department has no jurisdiction in the case. The order pointed out that call options were not part of the transaction and so it did not attract the transfer pricing rules, media reports said. It has been welcomed by the company. Other global majors, including IBM Corp, Royal Dutch Shell Plc and Nokia Oyj that are also fighting transfer-pricing cases in India, see a ray of hope in the order. "Verdict of the Bombay High Court reaffirms justice for Vodafone and an excellent signal for foreign investors into India," Fereshte Sethna, Vodafone's lawyer, has been quoted as saying in The Economic Times.
What next?
The finance ministry has said it will study the order and then take a decision. It has the provision to move the Supreme Court. But finance minister Arun Jaitley had recently hoped for a speedy resolution to tax issues. If he is indeed serious about that and is committed to ending the tax terrorism, it would be better for the government to not pursue the matter further.
Agencies continue to tweak India’s GDP growth forecast
New Delhi:MMNN:7 Oct. 2015
Since the beginning of last month, forecasts on India’s economic growth by various agencies have been mostly negative; yet, the overall picture does not look grim. Agencies predict India’s gross domestic product (GDP) will grow between 7% and 7.5% for the year.
Earlier, on 30 June, data released by the Central Statistics Office showed India’s GDP growth slowed to 7% in the April-June quarter from 7.5% in the January-March quarter as measured at market prices.
With the International Monetary Fund (IMF) cutting the outlook for India on Tuesday, here’s a look at who else is wavering about India’s growth and why.
IMF
The IMF has marginally lowered its 2015-16 growth forecast for India to 7.3% this year, lower than the 7.5% it projected in July. But it expects growth to accelerate to 7.5% the following year. It also added that India will remain the world’s fastest growing major economy. The Washington-based multilateral institution attributed the lowering of India’s growth forecast to the weakening of global external demand and the consequent impact on Indian exports.
Speaking in Washington on 30 September, IMF chief Christine Lagarde said “global growth will likely be weaker this year than last, with only a modest acceleration expected in 2016”.
World Bank
The World Bank has maintained India’s growth forecast for the year when other multilateral agencies and even the Reserve Bank of India think the global situation will drag down the country’s growth, reports The Economic Times. In its twice-a-year South Asia Economic Focus released on 4 October, the World Bank said India will grow 7.5% in the current fiscal, same as its earlier June forecast, but warned delays in the adoption and implementation of key reforms could affect investor sentiment.
Reserve Bank of India
While releasing its monetary policy on 30 September, the Reserve Bank of India (RBI) revised downwards its real GDP forecast for 2015-16 to 7.4% from the earlier expectation of 7.6%, saying that growth is expected to pick up in the latter part of the fiscal. The baseline outlook, however, is subject to considerable uncertainties surrounding commodity prices, monsoon and weather-related disturbances, volatility in seasonal items and spillovers from external developments through exchange rate and asset price channels.
Fitch Ratings
A day after the RBI revised downwards its real GDP forecast for 2015-16 to 7.4%, Fitch Ratings has lowered India’s GDP growth estimate for the current fiscal to 7.5% from 7.8% on average monsoon, but said the country is poised to grow at 8% next fiscal on the back of reform push.
In its Global Economic Outlook report, Fitch said India took over as the fastest growing BRIC this year with 7.5% GDP growth, driven by structural reforms and higher investment,, but added that GDP growth in the first (April-June) quarter was “disappointing” as it slowed to 7% from 7.5% in the preceding quarter.
Asian Development Bank
On 22 September, Asian Development Bank (ADB) pared India’s growth estimate for 2015-16 by 0.4 percentage points to 7.4% for 2015-16 from 7.8% predicted earlier, owing to economic slowdown in industrial countries, a weak monsoon and stalled action on key structural reforms. The report said a pick-up in the pace of investment and kickstarting the pending reforms will be vital to boost growth momentum.
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development (OECD) also trimmed its growth estimate for India in 2015 to 7.2% from 7.3% predicted earlier, but just like IMF, maintained that the country will still be the fastest growing major economy over the coming two years. The organization noted on 16 September that the main exception to the worsening global economy is India, “where growth is supported by strong consumer spending and public investment in infrastructure”.
“The slowdown has been sharpest in countries heavily dependent on commodities and/or with close trade links to China, notably in east and south-east Asia. The main exception to the worsening picture is India, where growth is supported by strong consumer spending and public investment in infrastructure,” it said in its report.
Moody’s
On 8 September, Moody’s Investors Service said the Indian economy would grow at 7% in the current fiscal on the back of slow recovery in industrial output and investment. It added that country’s current account deficit may remain low, supported by declining oil prices. “We have also reduced our projections for India to 7% in 2015 and 7.5% in 2016, from 7.5% and 7.6% based on high frequency indicators suggesting that the recovery in industrial output and investment is slow, and bank credit growth still subdued,” it said. Read more
UBS
Earlier in September, Swiss brokerage UBS revised downwards India’s GDP growth projection for the current fiscal to 7.1% from 7.5% earlier, on account of weaker external demand prospects, reported PTI. The global financial services firm has also lowered its growth projection for financial year 2016-17 to 7.6% from 8.3% earlier. The downward revision in growth projection comes despite lower oil prices which were expected to provide a boost to Indian growth.
“Weaker external demand prospects and slow progress on balance sheet repair leads us to curtail our growth forecast in spite of cuts in UBS’ Brent oil price projections to an average of $57.5 in calendar 2016 (from $70),” UBS said in a research note.
Oil Up as Russia Ready to Talk With Producers, US Rig Count Drops
Seoul:MMNN:5 Oct. 2015
Crude oil futures edged up on Monday after Russia said it was ready to meet other producers to discuss the situation in the global oil market, where prices have more than halved from last year's highs due to a persistent supply glut.
A report showing a fifth weekly fall in the US oil rig count also underpinned crude prices, although trading was thin with China away on holiday.
Brent rose 30 cents to $48.43 a barrel by 0420 GMT (9:50 a.m. in India) after it finished up 44 cents on Friday, while US crude rose 32 cents to $45.86 a barrel after settling up 80 cents, buoyed by news that Russia was ready to meet OPEC (Organization of the Petroleum Exporting Countries), non-OPEC producers for consultations.
Russia, the world's top oil producer, has been unwilling to cut output to support crude prices and last November it even refused to cooperate with OPEC in order to defend its market share.
Russian oil output reached a new post-Soviet monthly high of 10.74 million barrels per day in September.
But the country is now prepared to meet with OPEC and non-OPEC oil producers to discuss global oil markets if such a meeting is called, its energy minister said. He said a separate meeting between Russian and Saudi officials was being planned for the end of October.
Cash-strapped OPEC member Venezuela has been pushing for an emergency OPEC meeting with Russia to stem the tumble in oil prices, which hit 6-1/2 year lows in August.
Given weaker prices, global oil investments are on track to drop by 20 per cent this year, their biggest decline in history, said Fatih Birol, head of the International Energy Agency.
Data on Friday showed US energy firms reduced the number of oil rigs by 26 in the latest week, the biggest cut since April and the fifth straight weekly fall, a sign low prices were pushing drillers away from the well pad.
Saudi Arabia, however, is continuing with its investments in the oil and gas industry as well as solar energy despite the current drop in prices, its oil minister said.
On the geopolitical front, tensions have intensified with Russia saying its planes had struck 10 Islamic State targets in Syria.
The oil market is now waiting for an indication on when the Federal Reserve will hike interest rates for further trading cues. Asian stocks rose on Monday as the prospect of an imminent hike by the Fed faded after Friday's weaker-than-expected US employment data.