The Financial Express

Low deficit,11priorities put Pranab on tight rope

2009-07-06T13:00:00.004+05:30

Finance minister Pranab Mukherjee has set himself a basket of 11 priorities to address in the first Budget of the new government. This includes an at least 4% growth rate for agriculture, increasing investment in infrastructure to more than 9% within the next five years, and an integrated energy policy, besides a direct assistance to the poor to create a social safety net.

Latest estimates of government revenue and expenditure show all this will have to be done within the constraint of keeping the Centre’s fiscal deficit at less than 6.5% of the GDP as anything higher could impact sovereign ratings.

The best piece of news that Mukherjee will receive on Monday, as he drives for a quick Cabinet meeting to ratify the Budget before he addresses the Lok Sabha,

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Populist tinkering now, vision later

2009-07-04T11:58:00.005+05:30

The flamboyance of former railway minister Lalu Prasad gave way to a rather conservative Rail Budget 2009-10 presented by UPA’s new railway minister Mamata Mamata, who decided to continue with most of Prasad’s policies but clipped the freight loading to a more realistic target of less than 6% over that achieved in 2008-09.

For 2009-10, Mamata has estimated her cash balance will be 26.5% lower at Rs 14,201.27 crore. Accordingly, in her first Rail Budget presented under the UPA on Friday, she has decided to be prudent on the financial front, eschewing the lure of cutting passenger fares. She also left freight rates untouched. But she has managed to fulfill her earlier promise of providing monthly season tickets of Rs 25 to those with a monthly income of less than Rs 1,500—called izzat—along with announcing fare concessions to students and youth while promising on-board infotainment on the Rajdhanis and Shatabdis.

Her largesse has been concentrated on West Bengal. She has extracted a series of projects for the state, including a new locomotive unit, a coach factory and another 1,000 MW

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Obama to unveil plans for financial sector overhaul

2009-06-18T10:46:00.003+05:30

President Barack Obama will unveil on Wednesday his plans for reshaping US financial regulation, with proposals to close one bank regulator and create new overseers for big-picture economic risk and consumer financial product safety.

In a package of reforms that takes on many tough jobs while avoiding at least one, the administration will call for tighter oversight aimed at preventing a repeat of the severe banking and capital markets crisis that has shaken economies around the world.

Months of debate in the US Congress lie ahead. Committees of both the Senate and the House of Representatives have scheduled more than a dozen hearings on regulatory reform between now and mid-July. Conservative House Republicans have already offered their own rival plan.

Obama will present his proposals at 12:50 pm EDT on Wednesday, the White House said. Treasury secretary Timothy Geithner, members of Congress, regulators and representatives from the financial industry

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Consensus on reserve price, 3G auction soo

2009-06-17T11:16:00.006+05:30

Finally, the long-awaited auctions of 3G spectrum, the airwaves that enable faster data download and video streaming on mobile phones, is poised to take place within two months.

The way for the auctions has been cleared on Tuesday after the finance ministry and the department of telecommunications (DoT) have buried their differences over what should be the minimum reserve price for the auctions. The two have agreed on a reserve price of Rs 3,510 crore, which is higher than Rs 2,020 crore proposed by DoT earlier and lower than Rs 4,040 crore suggested by the finance ministry.

Another significant development is that a 2% administrative charge, proposed by the Telecom Regulatory Authority of India (Trai), on the successful bidders annually has been dropped.

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High Court asks Ambanis to frame new gas pact

2009-06-16T10:55:00.005+05:30

The Bombay High Court on Monday ordered Mukesh Ambani-owned Reliance Industries Ltd, India’s largest company, to sell natural gas to brother Anil Ambani’s Reliance Natural Resources Ltd at a price that is 44% lower than the price proposed by the government earlier.

The order could significantly impact the contours of the natural gas economy in the country. RIL has been asked to supply natural gas to RNRL for 17 years at $2.34 per million British thermal units. RNRL, however, cannot trade the gas but can use it as raw material in its power projects. Natural gas accounts for about 18% of the total energy-mix of the Indian economy.

An RIL spokesperson said: “The full text of the judgment of the honourable High Court has been received by us and is being reviewed by us.

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China venture capitalists most-favoured, India in 2nd spot

2009-06-15T15:31:00.001+05:30

Even as recent industrial output numbers signal that the Indian economy is gradually heading towards the recovery path, it is China that catches the fancy of venture capitalists (VCs).

“Apparently, among venture capitalists, there’s China and there’s everyone else,” says a recent global survey by Deloitte Touche Tohmatsu (Deloitte) on VC sentiment in the times of recession.

The survey reveals that 50% of global and non-India based Asian investors who plan to increase their investments over the next three years look at China as the favourite location.

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Tata Tea scouts global buys

2009-06-12T11:22:00.003+05:30

Tata Tea, the world’s second-largest tea company after FMCG giant Unilever with FY09 revenues of Rs 4,874 crore, on Thursday said it wants to acquire global brands in Russia, South America, Asia Pacific and Africa. These proposed acquisitions are part of Tata Tea’s new thrust on attaining global leadership in beverages.

Tata Tea is planning to operationally integrate five areas of its business—products & categories, brands, distribution, people, and processes—under an overarching management team of six people: Tetley CEO Peter Unsworth, Tata Tea MD Percy Siganporia, Tata Tea CFO L Krishnakumar, Tata Coffee MD Hamid Ashraff, Tata Tea HR head Nalin Miglani, and Tetley head of brands and marketing John Nicholas.

Branded tea contributes around 86% to Tata Tea’s consolidated worldwide turnover, with the remaining coming from bulk tea, coffee, and investment income. Two-thirds of Tata Tea’s revenues accrue from international markets.

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Honda Jazz-es up compact car segment

2009-06-11T12:02:00.002+05:30

After over a decade-long presence in India with bigger cars like Honda City, Civic, Accord and Honda CR-V, Honda Siel Cars India (HSCI) on Wednesday forayed into the mass volume compact car segment with Honda Jazz. The car, which is available in three variants, is priced between Rs 6.98 lakh and Rs 7.33 lakh (ex showroom Delhi) and is so far the most expensive super-mini car available in the country.

“Around 75-80% of the total passenger car industry in India is compact cars, and with Jazz we have entered into this segment,” says Masahiro Takedagawa, president and CEO, HSCI, adding that the segment should contribute to expanding the company's business in India and eventually take up its market share to double digit as against 4-5% now.

According to Takedagawa, the company is looking at selling close to 2,000 to 2,500 units of Jazz a month, which would be half the number of Honda City. HSCI, on an average, sells 3,500 to 4,000 units of Honda City a month.

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Satyam unveils results

2009-06-10T11:18:00.002+05:30

Barely days before Tech Mahindra’s open offer for an additional 20% stake, Satyam Computer Services made public the unaudited financial details that it had shared with bidders earlier. In a filing with exchanges, Satyam said soon after founder B Ramalinga Raju confessed to perpetrating a Rs 7,000-crore fraud in early January, the company lost about $183 million in contracts from 56 clients up to March 26.

However, Satyam says it received new business orders from 215 mostly existing customers with contract values totalling $380 million during the same period. The company had a bank balance of Rs 373 crore at the end of March 2009, but outstanding bank loans worth Rs 469 crore.

In the quarter ended December 31, 2008, the company had a PAT of Rs 181 crore on revenues of Rs 2,206 crore. Figures for the same period the previous year were not available for comparison. In January, Satyam had a PAT of Rs 4 crore on revenues of Rs 647 crore, and for February, it had a PAT of Rs 52 crore on revenues of Rs 637 crore.

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Mumbai special economic zone puts Raigad project on hold

2009-06-09T11:14:00.003+05:30

Reliance Industries-promoted Mumbai special economic zone (SEZ) has put on hold, the implementation of a Rs 40,000crore multi-product SEZ on 10,000 hectare in the coastal Raigad district. Mumbai SEZ, a company pursuing the proposed SEZ, whose petition was dis missed by the Supreme Court when it refused to extend the time for land acquisition, now does not want to proceed further till the Bombay High Court decides the matter. The apex court has asked the Bombay High Court to change the bench and conduct the proceedings.

However, Mumbai SEZ may exercise an alternative option and pursue land acquisition as the permission it has received under the Bombay Tenancy Agricultural Land Act still holds. According to this act, whatever land the company has acquired so far can be transferred on its name.

Mumbai SEZ has so far acquired 1,000 hectare of non-contiguous land and thus it may have to drop the multi-product SEZ.

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Air India won't get Rs 15,000 crore bailout

2009-06-08T10:04:00.005+05:30

The government has indicated that a bailout package for the crisis-ridden Air India will not be possible beyond $1-1.5 billion (Rs 5,000-5,500 crore) against the $3 billion sought by the airline. A hectic reworking of the capital restructuring possibilities is underway and is expected to be submitted by June 22.

“An equity infusion of up to Rs 1,500 crore, plus a soft loan of Rs 3,000-3,500 crore will be considered on a priority basis. There is no chance of the Airline receiving a package of Rs 14,000 to 15,000-crore package,” a very senior source in the civil aviation ministrty said. “In fact, the civil aviation ministry and Air India are currently involved in the preparation of exact details and a package. It is expected to be submitted around June 22 and thereafter the government will take a final decision,” top government sources told FE on Sunday on the condition of anonymity.

On Saturday, the civil aviation ministry held initial discussions in this regard with the National Aviation Company of India Ltd (Nacil), created through Air India-Indian Airlines merger in 2007.

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Multiplexes, producers agree on formula, first show June 12

2009-06-06T11:10:00.004+05:30

The two-month-old row between producers and multiplex owners over revenue sharing has ended, paving the way for a slew of releases from June 12. Both sides had met several times over the last month, but ultimately thrashed out their differences at a marathon 14-hour session at Yash Raj Studios on Thursday. The deal—BIG Cinemas was first to sign on the dotted line—was sealed at 3.30 am.

“Both sides have agreed to the deal,” said Reliance BIG Entertainment chairman Amit Khanna. However, other exhibitors such as PVR, Fame, Inox and Cinemax are yet to ink the agreement, said Kishore Lulla, CEO of Eros International, one of the industry’s largest producers and distributors. According to sources, they are expected to sign on Monday.

Under the terms agreed, producers and exhibitors will now share 50% of the box-office revenues in week one, then 42.5%, 37.5% and 30% in subsequent weeks.

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Industrial Credit and Investment Corporation of India Bank cuts loan rates, Public Sector Banks are next

2009-06-05T11:41:00.002+05:30

Even as public sector banks gear up to announce further rate cuts by next week, the country’s second-largest lender, ICICI Bank, on Thursday announced a 0.50% reduction in both retail and corporate rates. All existing floating-rate retail loan customers will benefit from the reduction. This is the third time the bank has pared its rates in the last six months. Explaining the decision, a bank spokesperson said, “Our cost of funds has fallen.”

ICICI Bank’s new floating reference rate is applicable to all floating-rate retail loans (including home loans) and will come into effect from Friday. The revised FRR stands at 12.75% pa, against 13.25% pa at present. The bank also announced a 0.50% reduction in its benchmark advance rate to 15.75% pa.

However, ICICI Bank has ruled out any more rate cuts in the immediate future. “We would not follow public sector banks in cutting our rates further,” the spokesperson said.

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Nuke deal opens new biz doors for Indian companies

2009-06-04T10:23:00.002+05:30

With the successful passage of the Indo-US civil nuclear cooperation agreement, and the exemption granted to the 45 member states of the nuclear suppliers’ group to engage India, have opened up tremendous new business opportunities for Indian companies.

Now, the Indian companies will get access to high technology from the US and other major technologically advanced countries.

At the same time, to minimise risks of unauthorised diversion, these same countries will institute stricter licensing requirements for acquisition, manufacture and trade in a range of sectors including nuclear, chemical, pharmaceutical, biotechnology, electronics, aerospace, lasers, nano-technology and specialty materials, etc. This will call for greater “responsible” action by Indian companies as well.

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Layoffs begin at Satyam, non-techies first to go

2009-06-03T10:17:00.005+05:30

Though corporate affairs minister Salman Khursheed had hinted at government intervention, the first phase of layoffs has started at Satyam Computer Services. Trainers, HR and sales & marketing executives are being singled out for action by Tech Mahindra, Satyam’s new owner.

“The first phase of layoffs has started. In the second phase, employees who have been on the bench for less than three months would go away,” said an official source. It couldn’t be ascertained how many on the bench have been asked to leave. “Some senior executives on the bench are being offered almost 50% of their salary or an option to go on a sabbatical. Several benched senior executives have moved out,” the source said.

On Monday, commenting on media reports that 10,000 employees could be retrenched at Satyam, Khursheed had stated, “Layoffs is something we are not going to turn a blind eye to, as we have a relevant presence in decision making (in Satyam Computer Services.)”

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Axis Bank to raise Rs 3,000-crore debt

2009-06-02T10:41:00.003+05:30

Axis Bank, the country’s third largest private sector bank, on Monday announced plans to raise Rs 3,000-crore debt in local or overseas markets for meeting its tier-I and tier-II capital needs.

Presiding over her first board meeting, on her first day in office as managing director & CEO of Axis Bank, Shikha Sharma, former MD & founder CEO of ICICI Prudential Life Insurance, announced plans for raising the capital in tranches.

The bank plans to raise Rs 500 crore of debt for its tier-I capital and the rest towards tier-II capital.

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Key bills to set stage for financial sector reforms

2009-06-01T10:37:00.004+05:30

While finance minister Pranab Mukherjee has asserted that the next wave of economic reforms will provide a sustained stimulus to growth, the finance ministry has listed out seven important pending reform bills—on insurance, pension and banking reforms for ‘priority’ passage by Parliament.

These bills form part of the 100-day agenda, being finalised by Prime Minister Manmohan Singh’s office, officials said. “The Cabinet’s approval will be required afresh to introduce the bills (except the Insurance Amendment Bill) again in the ensuing session of the next Lok Sabha,” the finance ministry has submitted in a note to Cabinet secretary KM Chandrasekhar and the PMO.

Officials said the government was keen to push through the insurance sector bills quickly which aim to raise the foreign direct investment limit to 49% from the current 26%.

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BIGFlix to widen screen in tier-II cities

2009-05-29T12:06:00.003+05:30

Video-on-demand and online movie rental company BIGFlix is planning to expand its business to almost 15 tier-II cities which include Lucknow , Baroda, Mangalore and Meerut. The company will spend 25% of its investment (around Rs 112.5 crore) in FY09-10 to target smaller towns and cities across India.

The key areas of focus for the Reliance BIG Entertainment company this year will be to strengthen its online service presence in major cities of Gujarat, Maharashtra, Uttar Pradesh, Madhya Pradesh and Delhi. Kamal Gianchandani, COO of BIGFlix.com, said, “We are looking at investing 50-55% of our total investment for the current financial year in building our online business for smaller cities.”

Initially, the company faced some challenges in terms of logistics, system integration and delivering services to customers on time.

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Prime Minister expands his council of ministers, inducts 59

2009-05-28T10:52:00.004+05:30

Eleven days after it convincingly emerged victorious at the hustings, the Congress-led UPA finally has a council of ministers in place. Prime Minister Manmohan Singh on Wednesday announced the much-awaited expansion to a full team of 78 members, inducting among others three former chief ministers-Vilasrao Deshmukh, Virbhadra Singh and Farooq Abdullah-and new entrants Mallikarjun Kharge and MK Alagiri at Cabinet rank.

Besides seniority in the party, it is evident that experience and capability played a large part in deciding the 33 Cabinet ministers that make up the Prime Minister’s core team. As expected, the DMK has three Cabinet berths: A Raja, who is likely to get IT & telecom; Dayanidhi Maran, tipped to get textiles; and MK Alagiri, who may get chemicals & fertilisers. NC leader Farooq Abdullah, who was piqued at being left out during the first ministerial announcements last Friday, is being tipped for the tourism portfolio.

Portfolios for the new ministers are scheduled to be announced on Thursday.

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Bharti may pay 5 billion dollars in cash for MTN deal

2009-05-27T13:03:00.003+05:30

Bharti Airtel is unlikely to face any problems raising funds to finance its $23-billion swap deal with MTN. Credit rating agency Standard & Poors has affirmed its long-term corporate credit rating at BBB-. On Tuesday, London’s Financial Times newspaper said Bharti might pay up to $5 billion in cash for the deal, citing “unidentified people familiar with the matter”.

S&P said the swap “could result in higher country risk and leverage, but within our tolerance level. The combined entity would also become a leading emerging market telecom operator”. Bharti is expected to use its cash reserves of Rs 11,000 crore (around $2.5 billion) to help bankroll the deal, for which the two companies have entered into exclusive negotiations up to July 31.

In response to a query from FE, Bharti said it wouldn’t need an onerous amount of funding.

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Bharti, MTN renew talks for 23 billion dollars swap deal

2009-05-26T10:26:00.004+05:30

The country’s largest telecom operator, Bharti Airtel, has reopened discussions to acquire a 49% stake in South Africa’s MTN for over $23 billion in a cash-cum-stock swap, after a year-long hiatus following the breakdown of talks between the two over the combined entity’s controlling structure. In the latest round, for which the two sides have entered into exclusive negotiations until July 31, MTN and its shareholders would get 36% stake in Bharti.

In a departure from last year’s strategy of direct acquisition and merger of MTN, this time around Bharti is looking at a merger only at a later stage. “The broader strategic objective would be to achieve a full merger of MTN and Bharti as soon as it is practicable, to create a leading emerging market telecom operator,” a Bharti statement said.

If the deal materialises, the combined entity would have 200 million users—with both partners contributing an equal 100 million each—creating the world’s third-largest telecom company in terms of subscriber base after Vodafone Plc and China Mobile.

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Malvinder Singh steps down, Sobti new Ranbaxy CEO

2009-05-25T10:42:00.004+05:30

Nearly a year after selling his family’s entire 35% stake in the country’s largest drug manufacturer, Ranbaxy Laboratories Ltd, to Japanese firm Daiichi Sankyo, Malvinder Singh on Sunday stepped down as the company’s chairman, CEO and managing director. Daiichi Sankyo director and Ranbaxy board member, Tsutomu Une, has been appointed as the executive chairman of the company while, Atul Sobti, the current COO has been appointed the new CEO. The changes were announced after the company’s board meeting on Sunday.

With this the Singh family’s association with the company, which his grandfather Bhai Mohan Singh founded in 1961, comes to an end. Singh had joined Ranbaxy in 1998 and became CEO in 2006.

Interestingly, Singh had last year assured that he would continue at the company’s helm of affairs for a minimum of five years.

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DLF close to wind power arm deal

2009-05-22T10:52:00.003+05:30

DLF is in the final stages of negotiating a deal to sell off its subsidiary, DLF Wind Power, to French company Eole-Res, which specialises in wind and solar energy. Though the exact value of the transaction is not clear, sources close to the development said the figure is close to Rs 1,000 crore.

India’s largest real estate company by market cap has been in talks with many European and Indian companies for selling the unit, as part of its strategy to hive off non-core businesses to clear its debts.

“Wind Power has met with a good response from strategic partners wherein the due diligence of the assets is currently underway,” DLF had said while declaring its financial results in April.

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Tata Motors issue raises rupees 4,200 crore

2009-05-21T11:06:00.005+05:30

Tata Motors has said it raised Rs 4,200 crore ($840 million) through secured non-convertible rupee debentures. The funds will be used to part repay the $3-billion bridge facility taken to acquire Jaguar Land Rover. Tata Motors had earlier prepaid $1.11 billion. The issue opened for bids on Wednesday at 10 am and closed at 5 pm. Tata Motors Ltd acquired the JLR brands from Ford Motor Co for $2.3 billion last year.

The debenture issue is among the largest by an Indian company, Tata Motors said. The debentures—issued in four tranches with maturities ranging from 23 to 83 months—carry a coupon of 2% and will be redeemed at varying premia on maturity. All the tranches are guaranteed by State Bank of India.

Tata Motors CFO C Ramakrishnan said, “The issue was quite a success and well oversubscribed.

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Cannot afford to miss the bus: Prime Minister

2009-05-20T10:51:00.006+05:30

With the Congress parliamentary party officially electing Manmohan Singh as its leader on Tuesday, the PM-designate—he is expected to be sworn in on Friday—said on the occasion that his new administration’s first priority is to re-energise government and make it more responsive and efficient.

Citing the challenges still ahead for the global economy, Singh said there is need to counter the slowdown in investment and employment generation to revive growth, while making it more inclusive. “We cannot afford to miss the bus now. We cannot afford to lag behind the rising economies of the East,” Singh said.

Mooting better financial management and economic reform, Singh said there is need to create a social and political environment that attracts new investment, without which growth cannot be sustained or made more inclusive.

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