Fin Weekly 26th July - 1st August

GENERAL

R-Power stuck in D6; Noel next Tata International MD

Friday, July 30: The priority list for the next D6 gas flow does not feature R-Power as a recipient. This spells out trouble for the dreams of Anil Ambani, an ambitious 8000 mw gas power projects throughout the country. However, sources say that that list expected next year could include R-Power. The cos. that feature in the first list include GSPC’ Pipavav Project in Gujarat, GSVCL project in Hazira in Gujarat, Lanco’s project in Kondapalli District Phase III, Bawana Project, Kashipur project and GMR’s Vemagiri Project.

Noel Tata, in a move that bolsters his application for the top post scheduled to be taken over two years hence, is named the MD of Tata International in Africa. Mr. Tata has spearheaded Trent to a success story before this.

Banks take RBI cue to hike deposit rates

Thursday, July 29: After the apex body raised the key rates, the banks have taken steps to increase the deposit rate. This will help banks to get funds to carry on their investment spree, and facilitate fund management and deployment. The lending rates, however, will not be impacted since the banks benefitted from the cheap funds after the crisis and they fear a further deceleration in demand…

RBI Checks on Inflation

Wednesday, July 28: RBI, the apex body in deciding key rates hikes repo rate and reverse repo rate by 25 and 50 bps respectively. The new rates stand at 5.75% and 4.5% respectively. The rates reflect tightening of money to the banks and hence leave less money ultimately available with the public. The Governor though feels that increase in demand will offset the effect and the growth will remain sturdy…

Singh Bros out of Parkway; RBI spells growth, to curb inflation

Tuesday, July 27: Singh bros, who recently let go off Ranbaxy to concentrate on Fortis, have pulled out of Parkway. The move ensures they make Rs. 340 cr on an investment of Rs. 3800 cr. However analysts feel that this was a good move by the Singh Bros as they had already pushed the price to $3.8 per share and a price above $4 would have made the deal unviable for them. Malvinder Singh, Chairman of Fortis HealthCare, however affirmed that the group strategy of expanding in Asia, as shown by their purchases in WockHardt and Piramal HealthCare, would continue…

Trouble for Raja, CVC probes in

Monday, July 26: A. R. Raja, the telecom minister is in deep trouble. The Central Vigilance Commission, the anti- corruption body has set up an enquiry in the mishandling and alleged corrupt practices of the DoT. Some of the allegations include the loss of Rs 60000 crore loss to exchequer by allocating 2g spectrum at cheap prices, allowing two big players to operate on both the platforms, inaction against players having non-operational or notional licenses and blocking up spectrum. The probe is yet another addition to the already spiced up issue…

CORPORATE

RMW to buy out Inox; HCL Tech beats Street estimates

Friday, July 30: Reliance Media Works (RMW) has put up a bid to buy 67% stake in Inox after a bloody battle ended for Fame. The offer price is a whopping Rs 120 a share for the share which is valued at Rs 71.95 in the market. The promoters are allegedly asking Rs. 140 a share for the buy out . HCL Tech beat street estimates of a loss after peers Infosys and TCS posted decline in profits. Net Profits rose 3.7% to Rs. 341.8 cr. and net revenues up 17.8% at Rs. 3425.4 cr…

Pepsi reshuffles top team; Mahindra posts good results

Thursday, July 29: Pepsi reshuffles the top team. Praveen Someshwar will now head beverages and Punita Lal would be the CEO of the non-carbonated beverages JV with Tata Tea, a business with huge potential growth. Meanwhile M&M posted results that beat market expectations. Profits rose 40% to an impressive Rs 562 cr. and the sales were up 21 % at Rs.5124 cr. QoQ in the Apr June quarter…

RIL in news; L&T net up

Wednesday, July 28: RIL, the company with the highest weight on the bourses, is once again on expansion mode. While it drills two more wells in KG-D6 basin, its polyester business is once again being brought back to life as they acquire Bombay Dyeing plant for Rs.300 cr. The investors are yet to put their approval to the deal. Meanwhile L&T, India’s largest engineering company has posted a net profit of 15% at Rs. 666 cr. and a net sales increase by 6.5% at Rs. 7913 cr. QoQ in the FY11 first quarter…

Parkway slips ,Fortis justifies; Tech Mahindra slips the telecom ladder

Tuesday, July 27: In an exclusive interview to ET, Malvinder Singh of Fortis Healthcare justified the move to exit the bidding for Parkway against Khazanah. He agreed to his interest in parkwaty and the rationale to bid the price to $3.8 a share, but resisted the temptation to enter a bidding war in light of the shareholders’ interest. Tech Mahindra, on the other hand, grew marginally at 105 to post profits of Rs 144.31 cr. QoQ, a figure lower than expectations. Vice Chairman Vineet Nayyar, accepted that the telecom business was under pressure but emphasized that the revenues still were in comparison with peers operating in telecom segment...

Vodafone goes big on Essar; PSU disinvestment mixed

Monday, July 26: Vodafone has big plans in the mobile internet segment. It wishes to buy more stake into its JV with Essar and has valued Rs. 3400 cr as the net worth of Essar’s holding. Essar can still hold its 33% stake or may go to the public to offload its stake, but the extra premium it gets in the Vodacom price is too lucrative to be given away. In an another event, whereas the FPO for SAIL goes on hold as the necessary clearances are not secured, the FPO for Engineers India Ltd. has an FPO band set up at Rs 270 to Rs 290 per share. Notably, the government still holds 90.4% stake in the state run enterprise…

ECONOMY

Infrastructure difference between 8.5% and 10% growth: Rajan

Friday, July 30: Raghuram Rajan, economic advisor to PM, says that India can achieve 10% growth if infrastructure is given a fillip. However, given the current state India could grow at 8.5%. He emphasizes on catching the export growth, a balanced economy and controlling huge expenditure…

Core Sector grows the slowest at 3.4%

Thursday, July 29: The predecessor to the IIP numbers, core sector grew the slowest in this June at 3.4%. This has been mainly due to a drop in the cement and steel growth, which again is because of the mansoon effect. Going forward the growth scenario looks bleak as factory output too declined to register a growth of only 11.5% in may…

RBI still a big say in regulation

Wednesday, July 28: After a spat between RBI and IRDA over Ulips and the ordinance to resolve conflicts by a committee headed by Finance Minister, has now a twist again. RBI Governor will now head the committee as Vice Chairman. The dispute if between any of the four regulators, RBI, SEBI, IRDA and PRFDA will come to the committee after first reporting their dispute at a committee chaired by RBI Governor.

India’s sovereign rating upgraded; Sugar prevails over ethanol

Tuesday, July 27: Moody’s, the international rating agency has upgraded the sovereign rating of the company from Ba2 to Ba1. This has been done in the light of lower fiscal and revenue deficit expected, measures in petrol price subsidy and high expected GDP growth. The move will facilitate greater investment into the country. In news too, the EGoM have decide the price at Rs. 28 for ethanol to be paid by the oil companies to the sugar industry. Although this is higher than the price of Rs 18 as demanded by the oil companies, sugar definitely has the laugh over ethanol this time…

M-banking to be the buzz; Rupee down, IIP in transition

Monday, July 26: M-banking is probably the solution that the cabinet secretariat has in mind. In consultation with RBI, the secretariat wants the mobile services in banking to extend from merely checking balances in accounts to offer other services as mobile money transfer, extending its reach to the rural areas and tie up with mobile SPs for the same. Rupee, on the other hand slips to Rs 47 a dollar on account of macroeconomic conditions in the US and imports showing faster growth as compared to exports. The much awaited new IIP index which aims to reduce the fluctuations and changes the base year to 2004-05 is underway. Lets hope it gets implemented soon…

BUSINESS OF BRANDS

Big South Indian chains hold high; Amazon kindle gets cheaper

Friday, July 30: Big South Indian retails chains like Shri Kannan in Coimbatore, Shri Murugan in Chennai hold high in vicinity of national players like Big Bazaar and Reliance Retails. The reason among many is the familiarity and the local understanding that carry these chains among the most valuable in customers’ mind. Amazon’s e-book reader Kindle now comes at $139, a rate slash from #$189 earlier. Bless competition and free economy…

Merc to end tie up with Tata; Maruti fixes over Alto

Thursday, July 29: Mercedes is stated to have its own paint shop in India, earlier the only tie up they had left up with the Tatas. The JV that broke up finally this year with Daimler exiting 5.3% in Tatas after Tatas offloaded the share in JV around 2000-01. However, Daimler believes that the relations between the two groups are very cordial. Maruti in another setback to its cars has called back nearly 6000 Altos which were tweaked with the new engine. The engine reportedly has an oil leakage which is being fixed by recalling the Altos recently.

Desi, the call in the handset market

Wednesday, July 28: Desi brands like Micromax, Zen, Intex and Spice have hit the hardest in Nokia’s coffers. With a poised 27000 cr market in India, the local players have successfully registered their presence in the low and the mid end market. Next on the cards are the smart phone and 3G phone. With a smartphone in the vicinity of Rs 8000, Intex is going to set the market on fire and the share of the smartphone in the overall sales may well swell up to 37-40% from the current 10%...

Dabur on buying spree, Landmark makes profit

Tuesday, July 27: Dabur on its first ever overseas acquisition buys Turkish hair and skin based corporation Hobi Kozmetik for Rs 324r cr. The deal is expected to be completed by the third quarter of FY11. The company’s net profit ending first quarter FY11 was up 20.5% at Rs. 107.39 cr. QoQ. Landmark group, the owner of Lifestyle International and several other format stores as a group is expected to post profits for the first time this year in its total period of operation. This is facilitated mostly by the spring up of Lifestyle International to profits.

Kraft eyes Indian biscuits; Toyota the small car market, and Zynga the web

Monday, July 26: It seems like India is the most happening place in the business world. The cake which has recently become too big has its share for nearly everybody. Kraft, second largest foods company, is in talks with Cremica and Surya Food & Agro to mark its presence in Indian biscuits market. No wonder, they want this distribution to happen through the Cadbury’s distribution network, a company they recently acquired. Toyota, the world’s largest car maker is to come out with Etios, its small car specially designed for the Indian market. In fact, the tagline is self explanatory-“World First, India first”. For all those who love FarmVille and Mafia Wars, the maker of these online FB games, Zynga eyes the online gaming space in the coming years. Well Amazon, Google and eBay be better on their toes…

ED VIEW

Organised Retails , an option to try

Friday, July 30: Sumant Sinha, from a financial advisory firm, argues that modern retail needs a revamp and there is a need for organized retails. He believes that no doubt the efficiencies will improve, customer experience of shopping will improve and the kirana players will be able to sustain the storm. He believes a fast rate of growth may boost employment opportunities but the market needs to grow for it.

Controlling Inflation

Thursday, July 29: The RBI’s move to increase repo and reverse repo rates is welcomed by Rajan Bharti Mittal, president of FICCI and the author of the article. He admits that the industrial inflation will very well be brought under control via the move to increase rates. High rates, less borrowing, less demand and low inflation. But the primary articles inflation, especially the food inflation is supply based. Poor PDS, fluctuating monsoons have all been a reason for fluctuating prices. The measures, according to author, lie in having better supply chain, allowing foreign players in the market and improving of the public distribution system alongside better procurement mechanism.

Disaster to Success

Wednesday, July 28: The disaster story in the world has always followed innovation and improvement. Take Titanic or Chernobyl, engineers have come up with better designs and not shelved into their cocoons. The disaster of the Great Depression and the most recent one again bolster the same theory. Swaminathan Aiyer, the author, believes that the recent oil spill should call for better designs and refutes the argument that Americans wish- banning off shoring of oil completely, a move that will raise the prices many times over.

Importance of capital inflows

Tuesday, July 27: Chetan Ahya, a managing director at Morgan Stanley discusses the importance of the capital inflows into the country. Although the domestic savings serve as a huge fillip, the importance of foreign inflows should not be undermined. The author gives four reasons to support his point. Firstly, India needs capital inflows to offset its current account deficit. Currently the deficit figure stands at 2.9% of GDP. If the capital inflows slow down or dry up, exchange rates will depreciate significantly and domestic liquidity environment will tighten. Secondly, capital inflows are a high risk capital, and are an indirect indicator of the private corporate capital expenditure, a further signal of the growth. Thirdly, the current stock market is highly linked to the global equity markets. If the money is suddenly taken out or slows down, the confidence in the market falls affecting yet another source of funds for the private consumption. Fourthly, excessive capital inflows affect the cost of capital. The demand grows and if this suddenly stops, the companies face capital crisis and affects banking system in turn who are affected by defaulters and take a risk aversion mode. Safeguarding Financial Stability

Monday, July 26: Robert Shiller, the professor of economics at the Yale University, advocate the need for giving the power of avoiding the next crisis to the banks. He asserts that while the banks may not have anticipated the crisis, they worked in the right direction to control and reverse it. Although the view of the author is supported by the UK government, the US governments have worked in the opposite direction. They wish to vest the power to the Treasury Secretary, who in all political flavors may hamper the financial angle. The independence of the voter politics and a sound economy is obviously the appealing angle to the author. When in distress, let the experts handle the matter.

By

Abhishek kr. Deo Ashish Agarwal Ayush Goyal Kuldeep Kishore Rana Prashant Panwar Rohan Sreeraj sreekumar VR Shweta (2010-12 Batch)